AI "Is Not a Dot-Com Bubble," Federal Reserve Chair Jerome Powell Says

Federal Reserve Chair Jerome Powell doesn’t think the AI boom is another dotcom bubble. Speaking at a meeting of the Federal Reserve Open Market Committee, he argued that the current wave of artificial intelligence investment is grounded in profit-making firms and real economic activity rather than speculative excess. 

“These companies..actually have business models and profits and that kind of thing,” he said. “So it’s really a different thing” from the dotcom bubble, where investment capital flowed to firms with no clear business models. 

Also, one might note, the AI investments we currently see are not especially large, as a percentage of gross domestic product, compared to investment levels of prior general-purpose technologies such as railroads. 

Technology/Wave	Estimated Peak Investment as % of GDP	Time Period
Railroads	≈6%	Late 19th Century (e.g., 1870s boom)
IT/Dot-com Boom	≈4.6%	Q4 2000 (Peak for private domestic investment in information processing equipment and software)
AI (Current Estimate)	≈1.3%−1.5%	Estimated 2025 (Focus on AI data center capital expenditures)
Telecom	≈1%	≈2000−2001 or 2020 Peak (Specific boom estimates vary)

Also, AI investment levels are far below levels of dot-com era investment. 

The dot-com era investments happened across a wide range of information processing equipment and software categories, while AI investment is much more narrowly focused on high-performance chips and servers, as well as the data centers which house them. 

That doesn’t mean overinvestment is no risk at all. Markets tend to overshoot before correcting, so some “waste” (overinvestment that does not produce a positive outcome)  will happen. 

That might well be a different matter than a general “investment bubble in AI,” though.