Remember the late ’90s? When everyone thought pets.com was going to revolutionize how we buy dog food and every company with “.com” in their name was basically printing money? Yeah, well, Goldman Sachs just dropped a note that’s giving us some serious déjà vu vibes about today’s AI craze.
The investment bank’s strategists are basically saying: “Hey, this AI party is fun and all, but maybe we should keep an eye on the exits.” They’ve identified five warning signs from the dot-com bubble that we should watch for, and honestly, some of them are already starting to flash yellow.
1. When Companies Go Full YOLO on Spending
Back in the day, tech investment hit 15% of GDP right before everything went sideways. Today? Big Tech is on track to blow $349 billion on AI infrastructure in 2025. That’s Amazon, Meta, Microsoft, Alphabet, and Apple basically betting the farm on robot overlords. When investment spending peaks, historically speaking, that’s when things get spicy.
2. Profits Start Playing Hide and Seek
Here’s the thing about bubbles – profits usually peak way before the party ends. In the ’90s, corporate profits topped out in 1997, but stocks kept climbing for three more years. Right now, corporate profits look pretty healthy (S&P 500 margins are above average), but Goldman’s keeping a close eye on this one.
3. Debt Becomes the New Black
Companies started borrowing like there was no tomorrow before the dot-com crash. Corporate debt as a percentage of profits peaked right as the bubble burst. The good news? Most tech giants today are funding their AI shopping sprees with cash flow, not debt. Meta did raise $30 billion in bonds recently, but overall, we’re not at 2000 levels of corporate FOMO financing yet.
4. The Fed Starts Cutting Rates (Sound Familiar?)
Lower rates = cheaper money = more risk-taking = potential bubble fuel. The Fed just cut rates in October and is expected to do it again in December. Ray Dalio and other market veterans are already side-eyeing this easy money policy as potential bubble juice.
5. Credit Spreads Start Stretching
When investors get nervous, they demand higher yields to compensate for risk. Credit spreads widened before the dot-com crash, and while they’re still historically tight, they’ve started widening recently. It’s like the market’s spidey sense is starting to tingle.
The Bottom Line: Goldman isn’t saying “sell everything and hide under your mattress.” These warning signs appeared at least two years before the dot-com bubble actually popped, and they think the AI trade still has legs. But it’s worth remembering that even the smartest money on Wall Street can get caught up in the hype.
The key is staying aware without becoming paranoid. AI is probably not going away like pets.com did, but that doesn’t mean every AI stock is destined for greatness. Keep your wits about you, diversify your bets, and maybe don’t put your kid’s college fund into the latest AI darling just because it has “neural” in the name.
After all, those who don’t learn from history are doomed to repeat it – and nobody wants to be holding the bag when the music stops.