Remember the dot-com bubble? For many investors, it’s hard to forget. Between 1995 and 2000, internet companies captured headlines and investor enthusiasm. Hundreds of IPOs raised billions, often for businesses with little more than a website and a dream. In retrospect, some of the ideas seem kind of loony.
At its peak, the Nasdaq soared more than 400%. By 2002, it had given back nearly 80% of that gain. Analysts estimate 80–90% of new dot.com companies eventually disappeared in what became known as the “Tech Wreck”.
And yet, the story didn’t end in failure. From the rubble emerged some of the most powerful businesses of our time: Amazon, PayPal, Google, and others. For the patient, diversified investor, the internet boom wasn’t a catastrophe; it was a once-in-a-generation wealth creation event.
Déjà Vu All Over Again
Fast forward 25 years, and the excitement around Artificial Intelligence feels strikingly similar to the dot-com mania. In scale and speed, the AI boom already makes the dot-com frenzy look small. Less than two years ago, AI was something only novelists and techies talked about, but that’s all changed now.
In the first quarter of 2025 alone, AI startups raised $73 billion, more than half of all global venture capital. By mid-year, the total had already surpassed $118 billion, outpacing what the dot-com boom raised in five years. A single round of funding for OpenAI—$40 billion— nearly matched all dot-com IPO proceeds from 1999.
The enthusiasm for AI isn’t limited to venture capitalists. Governments and global corporations are pouring in capital. The AI race has become a national priority, with Europe, China, and the U.S. committing hundreds of billions, while political leaders talk of top priorities and existential threats.
What Bubbles Teach Us
Bubbles are nothing new, and they are a global phenomenon. In the 1600s, we had Tulip Mania. In the 1700s, the South Seas Bubble and the Mississippi Bubble, while the 1800s saw the Railway Bubble. The 1900s gave us the Roaring ‘20s, the Japanese Asset, and the dot-com bubbles. This century, we’ve already had the Real Estate and Crypto bubbles, and now, Artificial Intelligence is having its moment.
Every market bubble shares familiar traits. Usually, there are the headlines: the internet will change everything (true), housing prices will never fall (false), and AI will change the way we live and work (who knows?). True or false, the story catches on and money flows.
Bubbles are accompanied by other things, including excessive optimism. “This time is different” thinking justifies sky-high valuations. Can it be long before we hear “My Optimus Prime robot will be the guilt-free, do-it-all, work-for-nothing, and most of all, happy partner I always wanted”?
Enthusiasm makes for easy money. Abundant capital, often from small investors, fuels rapid expansion and speculation. There are many terms for this, including going viral, catching fire, and blowing up, but all come down to the same thing: the fear of missing out, or FOMO. Now that the ERAs Tour is over, would you still pay $4,000 to watch a Taylor Swift concert?
Bubbles Tend to Look Alike
Bubbles in the era of public securities markets have another characteristic: lots of entrants, but few survivors. Many players rush in, but only a handful endure. There is a period of great enthusiasm, but eventually there’s a bust. Markets reset, weak players disappear, and the field clears for winners.
“Eventually” can be a long time. Amazon did not see a profitable quarter for four and a half years after its IPO. It can take enormous fortitude to wait out the emergence of winners. Between its high price in December of 1999 and September of 2001, Amazon lost over 95% of its value. History tells us that bubbles aren’t entirely about hype; they’re also about progress. The internet didn’t vanish after 2000; it literally changed the world. AI will likely be no different.
As an advisor, my role is to help you see past the headlines and position your portfolio for the long term. The truth is, none of us can know which AI company will be tomorrow’s Amazon or tomorrow’s Pets.com. But we don’t need to. Jack Bogle, the founder of Vanguard, said it best: “Don’t search for the needle in the haystack. Just buy the haystack.”
By owning broad, diversified investments, you automatically hold the future winners. You don’t have to chase them, and you don’t have to risk concentrating your portfolio in the names that won’t survive.
Bubbles come and go, but innovation endures. Just as the internet reshaped the world after its painful correction, AI will leave its mark on every industry. The smart investor’s job isn’t to predict the next breakout stock. It’s to stay diversified, disciplined, and patient—letting time and innovation do the heavy lifting. That’s how wealth is preserved. And that’s how it grows.
