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Is the A.I. Boom Turning Into an A.I. Bubble?

As the stock prices of Big Tech companies continue to rise and eye-popping I.P.O.s reëmerge, echoes of the dot-com era are getting louder.

It has been more than a quarter of a century since the bursting of the great dot-com bubble, during which hundreds of unprofitable internet startups issued stock on the Nasdaq, and the share prices of many tech companies rose into the stratosphere. In a research paper entitled “25 Years On; Lessons from the Bursting of the Technology Bubble,” which was published in March, a team of investment analysts from Goldman Sachs argued that it wasn’t: “While enthusiasm for technology stocks has risen sharply in recent years, this has not represented a bubble because the price appreciation has been justified by strong profit fundamentals.” The analysts pointed to the earnings power of the so-called Magnificent Seven companies: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. Between 1995 and 2000, it pointed out, the tech-heavy Nasdaq index rose fivefold, and at the peak of the market a widely used valuation measure for the stocks that trade on it—the price-to-earnings ratio, or “P/E”—topped a hundred and fifty, a level not seen before or since then.

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