Henry Blodget Weighs In: Today’s AI Boom vs. the Dot-Com Bubble
The latest U.S.–China trade talks were going smoothly—until news broke that Beijing had accused Nvidia of antitrust violations. Conveniently, Nvidia is also the perfect springboard for the bigger debate gripping Wall Street: is today’s AI-fueled stock rally just another bubble in the making?
On valuation, the comparisons are hard to ignore. The S&P 500’s cyclically adjusted P/E ratio is near 38, brushing up against levels last seen in 2022 and only topped during the dot-com bubble, according to Morgan Stanley.
Few voices are better positioned to weigh in than Henry Blodget. Once the star analyst of the late 1990s internet frenzy—before an SEC case forced him out of Wall Street—Blodget went on to found Business Insider and run it until its sale to Axel Springer.
“As with the Internet, AI’s impact is already extending far beyond the tech industry,” Blodget says. “AI infrastructure spending—roughly $400 billion this year—is supercharging both the global economy and stock markets. If the boom busts, the shock waves won’t stop at tech.”
But he also highlights two key differences from the 1990s. First, much of today’s AI investment is happening in private markets, meaning fewer retail investors would take a direct hit if things collapse. Second, the buildout is largely being funded by earnings from mega-cap tech firms rather than mountains of debt.
That doesn’t mean there won’t be casualties. “In an AI bust, markets and commercial real estate would get crushed, billion-dollar data centers would be sold for scraps, and hundreds of startups would vanish. But the damage should be more contained,” he argues.
Blodget reflects on what he got right—and wrong—last time. He was correct that the internet was transformational, that the late-’90s craze was a bubble, and that most early dot-com players wouldn’t survive. But he underestimated how brutal the crash would be—even strong companies got hammered—and how many long-term winners would ultimately emerge.
He recalls the once-crowded search engine landscape before Google took over, noting today’s AI leaders could face the same fate. “These LLM giants demand massive capital and energy. Their progress relative to investment is slowing, and the next breakthrough always seems just out of reach,” he says.
Still, winners will emerge—just as Amazon did when skeptics dismissed e-commerce. “Retailers like Walmart and Barnes & Noble never caught up. Executives who mocked the Internet as a fad were shown the door. Investors who said internet stocks were ‘too expensive’ underperformed for years,” Blodget reminds.
And the big question now? Timing. “Are we in 1996 or 1999?” Blodget asks. “There’s no way to know.”
