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Artificial intelligence
CommentWorld
Jeffrey Wu
Jeffrey Wu

Opinion | AI boom echoes the dotcom bubble, but not in the way you think

  • After the dotcom bubble burst, a glut of infrastructure looked like a mistake, but it laid the foundation for the internet’s eventual growth
  • Today’s AI investments may lower the cost of computing power and provide the basis for future breakthroughs, even if they precede a market correction

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People walk through a display of fibre optic cables at the Mobile World Congress in Barcelona on February 26. As a result of the dotcom bubble of the late 1990s, more than 128 million km of fibre optic cable was installed in the US. Photo: Bloomberg
Jeffrey Wu
As the sun rises on a new digital era, long shadows are being cast across a landscape dominated by giants – few more towering than Nvidia, whose market capitalisation has exceeded the entire Chinese stock market, as represented by H shares. This moment, emblematic of the burgeoning AI revolution, prompts us to ask: are we witnessing the inflation of a bubble, or the foundation of a transformative cycle?
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The internet’s evolutionary leap from mere information retrieval to inference – as even Google seeks to provide direct answers, instead of offering lists of links – signals a profound shift in our digital interaction and underscores the metamorphosis of search technology from a passive tool into an active assistant in deciphering the world around us. Yet, as we marvel at today’s technological feats, we must also question where the future of value lies in the AI domain.
The audacity of tech luminaries like SoftBank’s Masayoshi Son, who is seeking up to US$100 billion for a chip venture, and OpenAI’s Sam Altman, who hopes to raise a staggering US$7 trillion for an AI initiative, illustrates the scale of the ambition driving the current wave of innovation. Alibaba’s latest US$1 billion bet on Moonshot AI, a large language model start-up, further reflects the belief in AI’s potential to redefine industries and societies.

These figures aren’t just investments; they are bets on a future where AI underpins every facet of our lives. Yet, as history shows, the timing of value capture in technological innovations is notoriously uncertain.

The dotcom bubble of the late 1990s is often remembered for the dizzying rises and falls, amid sky-high valuations of internet start-ups and a frenzied rush of venture capital investments. However, a critical aspect of this period that is often overshadowed by the spectacular demise of companies like Pets.com and Webvan is the phenomenon of infrastructure oversupply, particularly in the telecommunications sector.

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Apple supplier Foxconn to build ‘AI factories’ using US hardware leader Nvidia’s chips and software

Apple supplier Foxconn to build ‘AI factories’ using US hardware leader Nvidia’s chips and software

At the time, telecoms titans like Nortel, WorldCom and Cisco were at the forefront of building out internet infrastructure, in anticipation of an explosion of digital activity. Driven by the belief that the internet would radically transform every aspect of our lives, telecoms companies proceeded to collectively raise US$1.6 trillion on Wall Street.

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