AI Stock Bubble Surpasses Dot-Com Era, Warns Top Economist

Wall Street’s AI Bubble Is Worse Than the 1999 Dot-com Bubble, Warns a Top Economist

A chief economist at investment giant Apollo says the top ten AI stocks are more detached from reality than the tech titans of the 1990s were. His chart is a stark warning that history is about to repeat itself. Back in 1999, Wall Street lost its collective mind over the internet. Companies with no revenue were suddenly worth billions, "eyeballs" were treated as currency, and market analysts predicted a frictionless future where everything would be digital. Then the bubble burst. Between March 2000 and October 2002, an estimated five trillion dollars in market value vanished into thin air. Today, it is happening again. This time, the magic word is not “.com.†It is “AI.†According to Torsten Slok, the influential chief economist at Apollo Global Management, a major global investment firm, the current AI driven market bubble is even more stretched than the dot com frenzy of the late 1990s. And he has the data to prove it. “The difference between the IT bubble in the 1990s and the AI bubble today is that the top 10 companies in the S&P 500 today are more overvalued than they were in the 1990s,†Slok wrote in a recent research note that was widely shared across social media and financial circles. The chart from Apollo compares the 12 month forward price to earnings (P/E) ratios of the top ten companies in the S&P 500 against the rest of the index. In plain English, a P/E ratio measures how expensive a stock is by comparing its price to its profits. A high P/E ratio means investors are paying a premium and are betting on strong future growth. Slok's chart reveals something stunning: in 2025, the P/E ratios of the top ten companies are even higher than they were at the absolute peak of the dot com bubble in 2000. This means investors are betting so aggressively on AI giants like Nvidia, Microsoft, Apple, and Google that their stock prices have become detached from their actual earnings, even more so than tech darlings like Cisco and AOL were in the nineties. The top 10 companies driving this frenzy, which hold the most significant market value on Wall Street, include tech titans like Nvidia, Microsoft, Apple, Alphabet (Google), Amazon, and Meta. It is a super concentrated AI frenzy that is pushing a handful of mega cap stocks into nosebleed territory. You have probably heard that the S&P 500 is performing well this year. Here is the uncomfortable truth: most of those gains are coming from just those ten companies. The other 490 companies in the index are barely moving. This kind of narrow rally is incredibly risky. It means the health of the entire stock market is dependent on the performance of a very small number of firms. If Nvidia sneezes, the entire market could catch a cold. The problem is that Wall Street is treating AI as if it has already fulfilled every promise, from a productivity revolution to trillion dollar cost savings. The potential is being priced as a certainty, even though most of those gains have not yet materialized. In 1999, the internet was real. It did change everything. But that fact did not stop investors from wildly overpaying for companies that could not deliver on the hype. The parallels with today’s AI excitement are chilling. Every corporate earnings call now dutifully mentions an "AI strategy," just like every company in 1999 slapped on a “.com†to its name. Stocks are surging on the vague potential of AI, not necessarily on real, current revenue. Wall Street is pricing in a perfect AI future without acknowledging the enormous risks: regulatory crackdowns, staggering compute costs, model hallucinations, or simply a slower than expected adoption rate. As Slok’s chart shows, the market is pricing these top ten AI heavy firms as if they are invincible. That is never a good sign. This is not a question of whether AI will change the world. It will, just as the internet did. The real question is how much investors are willing to pay today for profits that might not arrive for years, if ever. If history teaches us anything, it is that bubbles do not pop because the technology is fake. They pop when investor expectations dramatically outpace reality and the flow of easy money dries up. The more Wall Street bets on AI perfection, the more fragile this market rally becomes. If corporate earnings do not catch up to these sky high valuations, and soon, the market may not even need a specific trigger to deflate. The valuations alone could do the job. And when bubbles pop, they do not do so politely. They implode, wiping out trillions in value and shattering investor trust in the process. The technology called AI will certainly survive. The top ten companies likely will too. But the portfolios chasing this dream without a parachute might not. Just like in 2000, when it seemed the internet had made financial gravity obsolete, the AI hype train is speeding toward a cliff it thinks it can fly over. Torsten Slok is just reminding us that we have been here before.

Apollo's chief economist warns the AI bubble is even worse than the 1999 dot-com bubble

Torsten Sløk, in a recent research note, wrote "The difference between the IT bubble in the 1990s and the AI bubble today is that the top 10 companies in the S&P 500 today are more overvalued than they were in the 1990s." Put another way: Investors are betting so heavily on AI that the stock price of companies like Nvidia, Microsoft, Apple and others have become detached from their earnings. A chart Sløk included compared the 12-month forward price-to-earnings (P/E) ratios of the S&P's top 10 companies to the rest of the index and the S&P 500 as a whole. And today's bubble is even bigger than the one that marked the end of the dot-com era. While the S&P has hit new records recently and is currently near an all-time high, Sløk argues the performance boost is due to the rise of the Top 10 stocks. Investors, he worries, are buying the hype and paying prices as if the promises and boasts of these firms (such as trillion-dollar savings and world-changing breakthroughs) are a certainty. The 1990s were a lesson that not every promise would or could become reality. And even though many of those top companies are profitable, compared to the losses of many dot-com darlings, the fundamentals don't justify the multiples. Sløk has sounded other warnings about the economy. In June, he said he believed the U.S. was at a critical inflection point for stagflation, where the economy continues to grow, but inflation remains high. He blamed tariffs for that possibility.

AI stocks in bubble trouble - are Nvidia, Microsoft in danger? Economist says it's worse than the Dot-Com crash of 1999

Are we heading toward another tech market crash, one that is even bigger than the dot-com collapse of the late '90s? According to Torsten Sløk, chief economist at Apollo Global Management, we might be, and this time, the bubble is being driven by artificial intelligence, as per a report. In a recent research note, Sløk warned that stocks like Nvidia, Microsoft, and Apple, along with seven other companies, have soared so high on AI enthusiasm that their prices are now dangerously detached from reality, as per a Fortune report. Sløk wrote in his research note that, "The difference between the IT bubble in the 1990s and the AI bubble today is that the top 10 companies in the S&P 500 today are more overvalued than they were in the 1990s," as quoted by Fortune in its report. According to the report, currently investors are betting so heavily on AI that the stock price of companies like Nvidia, Microsoft, Apple and others have become detached from their earnings. ALSO READ: Why can't this Wells Fargo banker leave China? The Chenyue Mao case everyone's talking about Sløk even included a chart to explain his analysis, as per Fortune. In the chart, he compared the 12-month forward price-to-earnings (P/E) ratios of the S&P's top 10 companies to the rest of the index and the S&P 500 as a whole, which shows that today's bubble is even bigger than the one that marked the end of the dot-com era, as reported by Fortune. According to the Fortune report, although most of those top companies are profitable, compared to the losses of many dot-com darlings before the market crash at that time, the fundamentals do not justify the multiples. ALSO READ: OpenAI unveils ChatGPT Agent: Too tired to plan your date, shop online, or create a slide deck? This new AI tool has you covered Even though the S&P has hit new records recently and is currently close to an all-time high, Sløk pointed out that the performance boost is mainly because of the rise of the Top 10 stocks, according to the Fortune report. He is concerned that investors are buying the hype and paying prices as if the promises and boasts of these firms, like claims of trillion-dollar savings and world-changing breakthroughs, are already a certainty, as per the report. The Fortune report highlighted that the 1990s were a lesson that not every promise would or could actually become a reality. Sløk's not the only warning sounding the alarm, even Alibaba Group Chair Joe Tsai has warned that US AI stocks are in a bubble, as has long-time tech exec Tom Siebel, as reported by Fortune. ALSO READ: Biggest piece of Mars on Earth sells for $5.3 million -- meet the meteorite that shocked Sotheby's Why are people investing so heavily in AI? Because AI is seen as the next big revolution, capable of saving companies money, transforming industries, and driving future growth, as per the Fortune report. Are companies like Nvidia and Microsoft really in danger? They're strong businesses, but if their stock prices are built on unrealistic expectations, any disappointment could cause a sharp drop, as per Torsten Sløk's analysis.

Overvalued AI Stocks Like Nvidia, Microsoft May Trigger Market Crash Worse Than The Dot-Com Bubble, Economist Warns - Alibaba Gr Hldgs (NYSE:BABA), Apple (NASDAQ:AAPL)

The current artificial intelligence (AI) frenzy could potentially trigger a market crash more severe than the dot-com bubble burst of 1999, according to a leading economist. What Happened: Torsten Sløk, Chief Economist at Apollo Global Management, voiced his concerns about the inflated valuation of AI technology in a recent research note, as reported by Fortune. Sløk noted, "The difference between the IT bubble in the 1990s and the AI bubble today is that the top 10 companies in the S&P 500 today are more overvalued than they were in the 1990s." Heavy investment in AI has resulted in a disconnection between stock prices and earnings for companies such as Nvidia Corp. NVDA, Microsoft Corp. MSFT and Apple Inc. AAPL. Sløk presented a chart comparing the 12-month forward price-to-earnings (P/E) ratios of the S&P 500's top 10 companies with those of the rest of the index and the overall S&P 500, indicating a bubble potentially even larger than during the dot-com era. Despite the S&P hitting new records and approaching its all-time high, Sløk contends that the rally is largely driven by gains in the top 10 stocks. He warns that investors are getting caught up in the hype and paying inflated prices as if these companies' promises are guaranteed, which could ultimately trigger a major market crash. Sløk cautioned that the 1990s showed us not all promises can -- or will -- be fulfilled. He also noted that although many of these top companies are profitable, their fundamentals do not justify the multiples. SEE ALSO: Bill Gates Says Elon Musk Was 'Super Mean' After He Shorted Tesla Stock -- 'But He's Super Mean to So Many People' Why It Matters: Sløk is not the only prominent figure to have raised concerns about the AI bubble. Earlier this year, Alibaba BABA Chairman Joe Tsai warned about a potential bubble in the AI data center construction sector. He cautioned that the rapid expansion of data centers could surpass the early demand for AI services. In a similar vein, Microsoft CEO Satya Nadella compared the current AI frenzy to the dot-com bubble and pushed for measuring AI's impact with GDP growth. Billionaire investor Ray Dalio also raised alarms over the soaring valuations of U.S. AI stocks, warning of a potential bubble fueled by high prices and interest rate risks. Despite these warnings, the AI sector continues to attract significant attention. Tech analyst Dan Ives recently listed his top five picks for the second half of 2025, reiterating that the "golden age of tech" was here with the AI revolution at the forefront. On a year-to-date basis, First Trust Nasdaq AI and Robotics ETF ROBT, Invesco AI and Next Gen Software ETF IGPT and Global X Robotics and Artificial Intelligence ETF BOTZ surged 9.72%, 9.48% and 2.75%, respectively. READ MORE: Why Nvidia Still Looks Like A Bargain At A $4 Trillion Market Cap Image via Shutterstock Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. AAPLApple Inc$210.570.26%Stock Score Locked: Edge Members Only Benzinga Rankings give you vital metrics on any stock - anytime. Unlock RankingsEdge RankingsMomentum30.49Growth32.37Quality76.23Value9.26Price TrendShortMediumLongOverviewBABAAlibaba Group Holding Ltd$117.980.58%BOTZGlobal X Robotics & Artificial Intelligence ETF$33.290.21%IGPTInvesco AI and Next Gen Software ETF$49.73-0.36%MSFTMicrosoft Corp$512.750.21%NVDANVIDIA Corp$173.760.44%ROBTFirst Trust Nasdaq Artificial Intelligence and Robotics ETF$49.520.34%Market News and Data brought to you by Benzinga APIs