AI Crash Expected to Surpass Dot-Com Bubble Severity

Published Date : 19/07/2025 

Torsten Sløk, chief economist at Apollo Global Management, warns that the AI bubble is more inflated than the dot-com crash, predicting a potentially worse market bust. 

Torsten Sløk, chief economist at American asset company, Apollo Global Management, has issued a stark warning about the current state of AI companies and their stock prices. According to Sløk, these companies are more over-inflated than the dot-com companies of the early 2000s, suggesting that an even bigger crash could be imminent.

The dot-com crash around the turn of the century saw companies rushing to adopt and take advantage of the internet. A relatively new technology at the time, it was seen by venture capitalists as having significant earning potential. Over the last five years of the 20th century, they invested trillions of dollars, and stock prices for publicly traded internet entities soared, only to come crashing down when the market bottomed out.

By the early 2000s, many of the companies involved in the boom had gone bankrupt, and even now, industry giants like Amazon have lost huge portions of their investments, earnings, and market capitalization. Sløk argues that a similar fate awaits the major AI firms, including Apple, Microsoft, OpenAI, Meta, Google/Alphabet, and Amazon, among others. These companies have seen significant upticks in their valuations and stock prices in recent years, driven by massive investments in AI ventures.

However, Sløk contends that these valuations are completely out of line with the earnings potential of these companies. He suggests that the majority of the gains made during this AI boom have been due to the overperformance of these top stocks, and this trend is not sustainable. The boom is bigger this time, which means the bust could be even worse.

Sløk doesn't provide a specific timeline for when any such bust could occur, but it's clear that the level of investment being made by major tech companies is difficult to sustain. OpenAI, for example, recently accused Meta of offering $100 million signing bonuses to new AI talent. This comes after OpenAI invested $14 billion in ScaleAI, only to see 200 employees laid off from that company. CoreWeave is investing $6 billion in a new AI center, and Amazon might be investing an additional $8 billion in Anthropic, the maker of Claude. Not to mention Nvidia's ambitious plan to drive $500 billion in investment in 'AI Factories.'

Even if this weren't quite at the overhyped levels of the dot-com crash, there are plenty of recent examples of tech trends that seemed to encapsulate the future but failed to deliver. Meta invested tens of billions in the Metaverse and then pivoted to AI as if the Metaverse never happened. NFTs and blockchain were supposed to change how art, finance, and investing work, but that hasn't materialized yet.

AI, however, is already everywhere, even without much of a profitable product to show for it. While AI holds a lot of promise, similar to virtual reality, the Metaverse, and blockchain technology, does it warrant the hundreds of billions of investment it's receiving? Sløk argues no, and that when the world catches on, these companies, which have ridden high on a wave of hype and investment, may find their ephemeral silicon empires melt away into sand.

If the dot-com analogy holds, we could see significant consolidation, with many of the top companies surviving but scaling back their investments dramatically. Speculative AI companies would likely fail, while those with more robust revenue streams, like Amazon, Google, and Meta, would likely survive, albeit diminished in their influence. Just as the dot-com crash didn't kill the internet or all the websites on it, the AI bubble bursting wouldn't kill AI or make the technology less useful. It would continue to be developed and remain a useful, functional tool, but the hype might diminish over the following years. 

Frequently Asked Questions (FAQS): 

Q: What is the AI bubble?

A: The AI bubble refers to the overvaluation of AI companies and their stock prices, driven by significant investments and hype, which may not be sustainable in the long term.

Q: How does the AI bubble compare to the dot-com crash?

A: The AI bubble is considered more inflated than the dot-com bubble, with AI companies' valuations being even more out of line with their earnings potential.

Q: What are some examples of overhyped tech trends that failed to deliver?

A: Examples include the Metaverse, NFTs, and blockchain, which were hyped as game-changers but have not yet delivered on their promises.

Q: What could happen if the AI bubble bursts?

A: If the AI bubble bursts, we could see significant consolidation in the tech industry, with many speculative AI companies failing and major players scaling back their investments.

Q: Will AI technology still be useful after a potential bust?

A: Yes, even if the AI bubble bursts, the technology will continue to be developed and remain a useful, functional tool, but the hype and overvaluation may diminish. 

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