AI Market Could Suffer a Harder Hit Than the Dot-com Crash

Asvat Damodaran, a finance professor at New York University, has warned that a potential market crisis in the field of artificial intelligence (AI) could be more painful than the dot-com bubble burst of the early 2000s. According to the expert, the current situation differs fundamentally from past technological crises due to its cost structure and the scale of capital expenditures. This is reported by Ixbt.com news reports.

Speaking on the Intangible Economy podcast, Damodaran recalled that the internet boom of the late 1990s relied primarily on software and virtual projects. Today's AI industry, however, requires massive physical infrastructure — data centers, computing power, and energy systems. The fact that a large part of these projects is financed through debt further increases the risk.

Capital Capacity and Economic Risks

The professor noted that in the event of a sharp market correction, losses would affect not only shareholders but also creditors and contractors. This would cause the crisis to spread beyond the stock market and into the real economy. AI technologies do not operate like traditional IT businesses; an increase in the number of users means every new request requires additional computing resources.

Damodaran compares this model to the Spotify service: every song played has its own cost. This contradicts the classic laws of platform economics, as user base growth under low-margin conditions may erode company funds instead of creating value. Competition on price is intensifying, especially with the emergence of cheaper alternatives like China's DeepSeek.

"AI Horror" and Social Consequences

The economist calls the most optimistic scenario for artificial intelligence the "AI horror." If the technology delivers expected results and sharply increases efficiency, it will not be limited to automating a few tasks. This process could displace nearly half of "white-collar" office workers. The market currently does not account for such social costs.

Tech giants are currently building infrastructure with 10-year depreciation periods, but because technologies are changing rapidly, there is a risk they will become obsolete after 5 years. From this perspective, Damodaran considers Apple's cautious strategy to be rational. Instead of aggressive investments, Apple is choosing to observe the market and avoid costly mistakes.

According to ixbt.com, it remains unclear when the billions of dollars invested by companies like NVIDIA, Microsoft, and Google into AI infrastructure will pay off. Damodaran's forecasts urge investors not to become the next victims of a technological bubble.