Are We Re-Living the Dot-Com Boom?

Record-breaking valuations, soaring tech stocks, and remarkable AI enthusiasm; haven’t we been here before? Every major competitor is chasing after AI integration, investment, and development; conditions that have been likened to the 90s’ dot-com boom. Consequently, financial organisations, including the Bank of England, have warned of an ‘AI bubble’ that is likely to ‘burst’ and cause a sharp market correction, i.e. a stock market crash. In this article, we look at the warning signs and how this is relevant to us as prospective legal professionals.

Dot-Com Boom Retrospective

With the launch of the World Wide Web in the early 1990s, tech and telecommunications companies’ stock prices soared. These high valuations fuelled a surge of investment in internet start-ups, often with little consideration for profitability or long-term return on investment. The NASDAQ Composite index saw a growth of 580% between 1995 and 2000. This formed a ‘dot-com bubble’, which occurs when, due to excitement, the price of an asset rises exponentially faster in comparison to its real value. In 2000, the bubble burst, the stock market crashed, and numerous internet companies went bankrupt. The crash resulted in a continued decline for approximately 2 years, and it took NASDAQ 15 years to recover from its 77% decline.

Warnings

The Bank of England, along with other prominent financial institutions such as the International Monetary Fund, have warned of a potential AI bubble due to the surge in excitement over AI integration and high valuations in the technology sector; such bears a remarkable resemblance to the 90s dot-com bubble hype. In its October 2025 Global Financial Stability Report, the IMF warned of underestimated risk as well as equity and corporate credit valuations being ‘fairly stretched’. Stretched valuations indicate that stock prices are higher than the actual economic value or earnings of a company and therefore signal potential market instability.

Concern over the AI boom has been exacerbated after research from MIT concluded that 95% of organisations are receiving zero return on investments in generative AI. Beyond highlighting an increased risk of a sharp market correction, the Bank of England likened the current valuation stretch to the dot-com bubble and warned that a significant correction in global markets could influence UK financial markets.

Circular Economy

The world’s five major AI firms, are heavily investing into one another and creating a tight circular economy in the technology sector. For instance, Nvidia pledged a $100 billion investment into OpenAI, who, in return, committed to constructing data centres powered by Nvidia’s chips. Simply put, Nvidia’s investment into OpenAI circles back via demand for their hardware. Creating this circular economy has the effect of reducing competition and increasing the likelihood of generating an ‘AI bubble’, such is evidenced by numerous competition authorities’ investigations into Nvidia and the recent warnings on the AI bubble.

Nevertheless, a circular economy also accelerates progress in AI, encouraging integration and investment. As an example, according to recent reports, the effects of this have allowed Nvidia to accumulate an estimated market capitalisation of approximately $5 trillion, after achieving $4 trillion just 3 months ago, a statistic higher than the GDP of every country in the world, except the United States and China.

Measuring Growth and Impact

Moreover, US GDP growth in early 2025 was primarily characterised by growth from the AI sector. Investment in data centres and information processing technology has been reported to account for 99.9% of the United States’ GDP growth. This is an illustration of the vital and abundant role of the tech world in framing the country’s economic growth—if you can call it that—that’s to say that the US may very well have slipped into an economic recession without the surge of investments in tech.

Student Re-focus

As students, a sharp market correction has the power to influence job opportunities. As legal professionals, in the event of a crash, firms will have to confront lawsuits and investigationsinto any instances of fraud or misleading shareholders. Any company facing financial trouble will turn to its lawyers for guidance on mergers, asset protection, navigating insolvency regulations, and financial restructuring.