Veterans of Wall Street recall the dot-com bubble as if it were just yesterday.
The optimistic climate seemed unending as financial markets enjoyed the longest stretch of economic growth in U.S. history from the conclusion of World War II until the year 2000.
“From October 1998 onward, markets celebrated the seemingly relentless wave of IPOs from dot-com companies, often overlooking the sustainability of their business models,” states Goldman Sachs regarding that time. “A financial bubble was in the making.”
Warning signs were evident.
In 1990, stocks listed on the Nasdaq represented only 11% of the total value of stocks on the New York Stock Exchange. By December 1999, that figure had surged to 80%.
The Nasdaq index experienced an 86% spike in 1999, culminating in a peak on March 10, 2000.
And that’s when the bubble collapsed.
“As tech stocks lost their value, many internet startups, strapped for cash, became worthless in a matter of months and went under,” according to GS.
By October 4, 2002, the Nasdaq had dropped 77% from its peak.
Thus, when Jeff Bezos, one of the richest individuals globally, references the “B” word, financial markets take heed.
Jeff Bezos, the founder of Amazon, has substantial investments in artificial intelligence.
This year, Bezos Expeditions, his family office, put $72 million into Toloka, an AI company based in Amsterdam.
Last year, Bezos also participated as a key investor in a $400 million funding round for Physical Intelligence, a robotics startup that is also backed by OpenAI.
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Despite his connections to the tech industry, Bezos is not oblivious to the soaring valuations that have become the norm.
“When enthusiasm runs high, as it is currently with artificial intelligence… every idea gets funding, whether it’s a good or bad concept,” Bezos remarked during the recent Italian Tech Week event in Turin, Italy.
“In such frenzied environments, investors struggle to differentiate between the solid ideas and the poor ones.”
Even with his cautious view of the market’s current landscape, Bezos remains optimistic about the AI industry.
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Bezos perceives the current situation as an “industrial bubble” akin to the biotech bubble of the 1990s. While that bubble resulted in significant losses for many investors, he noted, “we also developed a few life-saving drugs.”
Thus, even if numerous AI companies with billion-dollar valuations fail, Bezos believes the technological innovations will justify the risks, despite some investors potentially facing losses from the bubble’s burst.
