Burst or Boom? The AI Hype and What It Means for Investors

Rohin Shah, Latin School of Chicago, Sophomore, Spring 2025

Artificial intelligence is no longer just a buzzword - it's the driving force behind one of the most popular investment waves of the 21st Century. “The global tech sector’s earnings per share have risen about 400% from its peak before the great financial crisis, while all other sectors together have risen 25% during that span” (Goldman Sachs, 2024) With numbers like that, it’s no wonder investors are pouring money into AI, but is this excitement a smart bet or the next dot-com bubble?

Speculative frenzy and inflated valuations are classic indicators of a bubble, and AI seems to be checking both boxes. “In 2024, we've witnessed Nvidia top a price-to-sales ratio (P/S ratio) of more than 40, while Palantir Technologies is currently pushing a P/S ratio of almost 69. Although it's impossible to predict when investor euphoria will fade, history has been crystal clear that extended valuations of this magnitude aren't sustainable over the long run” (Motley Fool, 2024). These kinds of numbers echo the late ’90s dot-com era, when investors poured billions into companies with significant potential but little profit. And when expectations outpace earnings, the fall can be steep. Matthew Morris, Midwest Division Head of the Portfolio Advisory Group at UBS, said, “One thing to watch for is…how are these companies going to make money? And, how are they going to make enough money to justify the price of their stocks?” 

Yet, this time could be different. Unlike the dot-com era, today's AI leaders often have real revenue, growing profits, and roles in global infrastructure. Companies aren't just riding investor excitement, but they're integrating AI into enterprise. If past market events have taught investors anything, it's that revolutionary technology often attracts attention, but also lays the groundwork for long-term change. The key, then, is distinguishing between a fleeting idea and innovations that will shape how the world functions.

Ultimately, whether AI proves to be a bubble or a breakthrough depends not just on investor sentiment, but on the staying power of the technology itself. "AI might be hyped, but hype doesn’t last—only real impact does. Only time will tell as to whether AI will impact our world,” Ari Fayne, a student at the Latin School of Chicago said. 

Interviewees:

Matthew Morris UBS, Midwest Division Head of the Portfolio Advisory Group

Ari Fayne, Latin School of Chicago, Student

Works Cited:

"AI Stocks Aren't in a Bubble." Goldman Sachs, 18 Sept. 2024, www.goldmansachs.com/insights/articles/ai-stocks-arent-in-a-bubble. Accessed 23 Apr. 2025.

"Prediction: The Artificial Intelligence (AI) Bubble Will Burst in 2025. Here's Why." The Motley Fool, 19 Dec. 2024, www.fool.com/investing/2024/12/19/prediction-ai-bubble-will-burst-in-2025-heres-why/?scrlybrkr. Accessed 23 Apr. 2025.