Remember when everyone thought pets.com was going to revolutionize how we buy dog food? Yeah, that didn’t age well. Now Goldman Sachs is basically playing the role of that friend who warns you about your questionable dating choices, except this time it’s about AI stocks and whether we’re heading for another spectacular market face-plant.
The Goldman crew just released their “How to Spot a Bubble Before It Pops” playbook, using the dot-com disaster as their reference guide. Spoiler alert: we’re not quite at peak bubble madness yet, but we’re definitely getting some serious déjà vu vibes.
The Five Red Flags That Scream “Maybe Pump the Brakes”
1. When Companies Start Spending Like Drunk Sailors
Back in the late ’90s, tech investment hit 15% of GDP before everything went sideways. Today? Amazon, Meta, Microsoft, Alphabet, and Apple are on track to blow $349 billion on AI infrastructure in 2025. That’s not Monopoly money, folks.
2. Profits Start Playing Hide and Seek
Corporate profits peaked in 1997, then started their slow-motion tumble while stock prices kept partying like it was 1999. Right now, S&P 500 profit margins are actually looking pretty healthy at 13.1%, so we’re not there yet. But keep an eye on this one.
3. Debt Becomes the New Black
Companies started borrowing like there was no tomorrow before the dot-com crash. Meta just raised $30 billion in bonds for their AI spending spree, which sounds familiar. Though Goldman notes most firms are still funding their AI adventures with actual cash flow, not just IOUs.
4. The Fed Starts Cutting Rates
Lower rates are like financial caffeine for stock markets. The Fed just cut rates in October and might do it again in December. Ray Dalio (you know, the guy who predicted basically everything) is already warning this could inflate another bubble.
5. Credit Spreads Start Widening
This is finance-speak for “investors are getting nervous and want more money to take risks.” Credit spreads are still pretty tight, but they’ve started creeping up recently. It’s like when your friend starts taking longer to text back – subtle, but telling.
The Bottom Line
Here’s the thing: Goldman’s analysts think we’re somewhere around 1997 in bubble years, not 1999. That means we might have a couple more years of AI stock euphoria before reality comes knocking. The warning signs appeared at least two years before the dot-com bubble actually burst.
So should you panic-sell your NVIDIA shares? Probably not. Should you maybe not bet your retirement on the next AI startup that promises to revolutionize everything? Definitely.
The AI revolution is real, but so was the internet revolution. The difference between getting rich and getting rekt often comes down to timing and not getting too caught up in the hype. Goldman’s basically giving us a roadmap to avoid being the person who bought pets.com at the peak.
Stay smart, stay skeptical, and maybe don’t put all your eggs in the robot basket just yet.