Opinion: What Is the AI Bubble And Why Is Everyone Expecting It To Burst?

The debate over whether we are in an economic bubble on the verge of bursting is trending. Many signs suggest that today’s situation closely resembles the dot-com bubble. But why? And what can we learn from what’s happening?

Everyone is talking about the AI bubble. The term has been used for years, but gained popularity a few days ago, after Sam Altman, OpenAI’s CEO, told reporters over dinner that he believed AI might indeed be in a bubble.

“When bubbles happen, smart people get overexcited about a kernel of truth,” Altman said during the on-the-record meeting, as quoted by The Verge. “Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes. Is AI the most important thing to happen in a very long time? My opinion is also yes.”

Altman’s closing optimism didn’t erase the unease. If anything, it planted a seed of doubt—one that grew when MIT published a study just days later claiming that 95% of AI startups fail to generate a financial return.

Since then, the market has been on edge. Investors have grown wary of new deals, while stocks have been shifting up and down in a roller-coaster over the past few weeks.

So what’s happening in the AI market? Are we really in an economic bubble—and if so, will it burst? We can’t predict the future, but we can examine some of the most compelling signals right now.

What Is The AI Bubble Exactly?

For those of us who aren’t economists—like me—and just want to understand what’s going on, it helps to start with the basics, in simple terms.

An economic bubble is a period when asset prices rise quickly and dramatically, surpassing their real value. It usually happens—put in Millennial terms—when investors get FOMO and throw money into businesses or products that aren’t actually worth that much. The problem is that the hype eventually fades, usually when returns fail to materialize, and the market crashes as a result.

We’ve seen this behavior play out throughout history in different markets: from the Dutch Tulip bubble in the 1600s to the dot-com bubble in the 90s.

“If the reason that the price is high today is only because investors believe that the selling price will be high tomorrow—when ‘fundamental’ factors do not seem to justify such a price—then a bubble exists,” explained the American economist and Nobel Prize winner, Joseph E. Stiglitz at the Symposium on Bubbles in 1990.

It’s not hard to see similar patterns in today’s economy—especially in the AI market.

The Signs Of An AI Bubble

At WizCase, we’ve been reporting on many of the multimillion-dollar—and billion-dollar—deals that AI companies, investors, and governments have been striking across the broad AI ecosystem: from services and products to talent and infrastructure.

This year alone has been staggering. In June, OpenAI—valued at $29 billion in 2023—entered an investment round that could raise its valuation to $100 billion. Just a few days ago, it was reported that the AI startup is now eyeing a $550 billion valuation.

And OpenAI is not the only fast-growing AI company in the market. Earlier this year, Lovable, the AI-powered software company for vibe coding, became the fastest-growing start-up to reach $100 million in annual recurring revenue and raised $200 million in a Series A round—it was founded in November 2023.

Then there are startups raising billions without even launching a product. Mira Murati, former Chief Technology Officer at OpenAI, launched her new startup Thinking Machines Lab, in February and had already raised $2 billion by July on the promise of releasing its first product soon.

Large-scale investments in AI technologies and infrastructure are happening worldwide. In February, Alibaba announced a $52.44 billion investment in AI and cloud infrastructure.

Governments are also stepping in. In January, Spain announced it was investing 150 million euros in a program to help Spanish companies integrate AI, and the Pentagon announced in July it was investing up to $200 million in AI companies with a focus in military operations.

It’s not just AI technology and infrastructure, either. AI talent is commanding contracts that would make world-class athletes jealous. Mark Zuckerberg, Meta’s CEO, has been offering highly attractive contracts to lure experts from competitors, including $100 million signing bonuses.

Curiously, Meta announced it would stop hiring AI talent just days after Altman raised concerns about an AI bubble and MIT released its study.

The Dot-Com Bubble Example

The AI bubble has been constantly compared to the Dot-Com bubble for both its obvious similarities and its digital nature.

In the 1990s, investors rushed to sign deals with internet-based companies carrying the “.com” label, much like today’s fixation with the “AI” tag.

Tech stock prices skyrocketed — we just saw Nvidia become the first company in the world to reach a $4 trillion market valuation.

Infrastructure spending during the dot-com era was massive, too. Today, we’re witnessing companies and investors pour billions into data centers and cloud infrastructure.

Back then, investors placed their faith in CEOs and company promises without solid proof that the business models were profitable or could deliver a clear return on investment. Popular startups crashed, such as Pets.com, which burned tens of millions before shutting down. The business wasn’t profitable, echoing MIT’s recent warning that 95% of AI startups fail to generate returns.

The dot-com bubble finally burst in 2000, triggering a market collapse. By the end of 2001, thousands of companies had gone bankrupt, billions of dollars had evaporated from the stock market, and millions of people had lost their investments.

So, When Will It Burst?

If we are indeed in an AI Bubble, the big question is: When will it burst? Predicting the market is impossible, but many experts suggest the AI bubble could explode very soon.

One classic sign that a bubble is about to burst is the end of the hype. OpenAI launched its highly expected GPT-5, its most advanced technology yet. Instead of wowing users, however, a sense of disappointment spread—even among its most devoted fans.

A few days ago, Nvidia’s CEO, Jensen Huang, tried to reassure investors and the public that the hype is far from over and that the AI boom still has a long way to go. “A new industrial revolution has started. The AI race is on,” said Huang last week. Some experts agree, insisting that this is just the beginning and that the AI boom remains in its early stages.

But is it?

If we are in a bubble and it bursts—like the dot-com bubble—the technology itself won’t disappear. AI is here to stay. What would collapse is the market, leading to a difficult crisis.

We could see a survival struggle among thousands of companies. In a few years—or even months—it will become clear which companies have solid foundations and can endure.

Just as eBay and Yahoo survived the dot-com crash, perhaps OpenAI and Anthropic will succeed—or perhaps not. It’s one of those frustrating situations where only time provides the answers, and all we can do is hope the impact isn’t too harsh.