Yahoo Finance·2025-09-28 12:05Economic Context - The dot-com crash was influenced by a combination of factors, including multiple interest rate hikes by the Federal Reserve, which raised the federal funds rate from approximately 4.7% in early 1999 to 6.5% by May 2000, making speculative investments less attractive [2] - A broader economic recession in Japan that began in March 2000 triggered global market fears, leading to a reassessment of the high valuations of internet companies [1] Infrastructure Overbuild - The dot-com era saw massive overinvestment in infrastructure, with telecommunications companies laying over 80 million miles of fiber optic cables based on inflated claims of internet traffic growth, resulting in catastrophic overcapacity [4] - Even years after the bubble burst, 85% to 95% of the fiber laid in the 1990s remained unused, leading to the term "dark fiber" [5] Current AI Landscape - Major AI companies are generating substantial income, contrasting with many dot-com companies that had no revenue; for instance, Microsoft's Azure cloud service grew 39% year-over-year to an $86 billion run rate, while OpenAI projects $20 billion in annualized revenue by year-end [7] - Despite historic levels of AI investment, there remains a significant revenue gap, with major companies having invested about $560 billion in AI infrastructure over the last two years but only generating $35 billion in AI-related revenue combined [9] Investment Viability - A recent MIT study indicated that 95% of AI pilot projects fail to yield meaningful results, despite over $40 billion in generative AI investment, highlighting a disconnect between investment and returns [10] - The current question for investors is whether the valuations and infrastructure investments in AI can be justified by near-term returns, or if much of today's AI infrastructure will remain underutilized, similar to the fiber-optic cables of the 1990s [11]