Remember the late 1990s? When tech stocks were soaring on pure hype, companies were making deals that looked brilliant on paper but were built on nothing but hot air? I do. Vividly. And lately, watching the frenzy around artificial intelligence investments, I’ve got that same uneasy feeling in my gut.
Just this week, reports surfaced about a massive potential deal that has one prominent market commentator absolutely fuming. He’s calling it out as the kind of circular arrangement that could signal we’re inflating another dangerous bubble in tech. If he’s right, investors need to pay close attention—because the fallout from the last one was brutal.
Echoes of the Dotcom Era in Today’s AI Frenzy
Let’s set the scene. There’s talk of a tech giant considering pouring billions into an AI leader, but with a twist: the money would essentially come back to buy the giant’s own specialized hardware. It’s the sort of interconnected transaction that raises eyebrows. Why? Because it doesn’t feel like genuine demand driven by real-world needs. Instead, it smacks of propping up sales through financial engineering.
In my view, this kind of setup is exactly what fueled the wild ride—and eventual crash—of the dotcom boom. Back then, companies were cross-investing, overhyping potential, and burning cash at rates that defied gravity. When reality hit, the market corrected hard. The tech-heavy index peaked and then plunged nearly 80% over a couple of painful years. No one wants a repeat performance.
What Exactly Is This Controversial Deal?
The rumored agreement involves a cloud computing powerhouse potentially committing around $10 billion to a pioneering AI organization. In return, that organization would agree to purchase vast quantities of the powerhouse’s custom-designed AI accelerators—chips built specifically for training massive models.
Critics are quick to point out the circular nature here. It’s almost as if the investment is less about believing in the AI company’s vision and more about creating artificial demand for hardware that’s struggling to find buyers organically. One outspoken voice put it bluntly: they’re so desperate to move these chips that they’re essentially paying someone to take them.
You can’t do these deals. These deals are not real.
That’s the kind of straightforward talk that’s cutting through the noise right now. And honestly, it’s refreshing in an era where so much AI hype goes unchallenged.
Why This Feels So Much Like 1999 All Over Again
Think back to the lead-up to Y2K. Companies were announcing partnerships left and right, often with little underlying substance. One firm would invest in another, which would then turn around and buy services or products from the first. It created an illusion of explosive growth.
Fast forward to today, and we’re seeing a similar web of commitments in the AI space. Hyperscale cloud providers are racing to build out enormous data center capacity. They’re ordering chips by the millions. But who’s footing the bill ultimately? Often, it’s the same circle of players passing massive sums back and forth.
Perhaps the most telling sign is the sheer scale of infrastructure pledges. One AI frontrunner alone has reportedly locked in commitments totaling well over a trillion dollars in recent months. That’s not a typo—trillion with a T. For context, that’s larger than the GDP of many countries.
- Aggressive partnerships with leading GPU makers
- Deals spanning multiple cloud platforms
- Contracts for advanced processors from various chip designers
- Expansions that assume endless demand growth
All of this assumes that AI adoption will continue exponentially without hiccups. But what if adoption slows? What if enterprises find current models sufficient for their needs? Suddenly, all that capacity looks excessive.
The Broader AI Spending Arms Race
It’s not just one deal or one company. The entire megacap tech sector has been pouring resources into AI at a breathtaking pace. Data centers are sprouting up everywhere. Power consumption projections are staggering—some estimates suggest AI could drive electricity demand equivalent to adding several new countries to the grid.
Investors have largely cheered this on, bidding up shares of anyone involved in the ecosystem. Chipmakers, cloud providers, even utilities—everyone’s getting a lift from the narrative. But seasoned observers are starting to question whether we’re crossing into unsustainable territory.
I’ve found that markets can stay irrational longer than many expect, but eventually, fundamentals reassert themselves. When spending outpaces actual revenue generation by too wide a margin, corrections follow. It’s not about being anti-AI—far from it. The technology is transformative. It’s about valuation and sustainability.
Historical Lessons We Can’t Ignore
The dotcom crash wasn’t caused by bad technology. The internet was—and remains—revolutionary. Many companies from that era survived and thrived once the excess was wrung out. But investors who bought at peak hype suffered enormous losses.
Consider some parallels:
| Dotcom Era | Current AI Boom |
| Cross-investments to boost metrics | Circular deals to drive chip sales |
| Massive infrastructure buildout | Explosive data center expansion |
| Valuations detached from profits | Spending far ahead of monetization |
| Hype-driven stock rallies | AI narrative fueling megacap gains |
The market eventually grew tired of promises without profits back then. It demanded real businesses. We’re not there yet with AI, but warning signs are flashing for those willing to see them.
What Happens If the Bubble Inflates Further?
One prominent critic predicts the market won’t tolerate this forever. He calls it a “cruel taskmaster” that punishes excess. If these interconnected deals continue proliferating, confidence could erode quickly when the first major disappointment hits.
Imagine a scenario where an expected breakthrough doesn’t materialize on schedule. Or regulatory scrutiny intensifies over power usage. Or enterprises pause big deployments to assess ROI. Any of these could trigger a reassessment of the entire spending spree.
In my experience watching markets for decades, sentiment shifts can happen faster than most anticipate. One quarter of solid results keeps the party going. A couple of misses, and suddenly everyone’s questioning the foundation.
The Case for Caution, Not Panic
Let me be clear—I’m not predicting an imminent crash. AI’s potential is enormous. Applications in healthcare, science, productivity—these are real and growing. Leading companies have strong balance sheets and diverse revenue streams to weather storms.
But prudence matters. Investors might consider:
- Diversifying beyond pure AI plays
- Paying attention to actual monetization progress
- Watching capital expenditure trends closely
- Remaining skeptical of deals that seem too intertwined
- Remembering that even great technologies go through valuation cycles
Healthy skepticism isn’t bearish—it’s smart.
Looking Ahead: Sustainable Growth vs. Hype
The best outcome would be for the industry to focus on genuine demand. Let customers buy chips and cloud services because they deliver clear value, not because of prepaid commitments or investment quid pro quos. That builds lasting businesses.
Some companies are already showing restraint, prioritizing profitability alongside innovation. Others seem caught in competitive pressure to match rivals’ spending announcements. Over time, the disciplined approach tends to win.
As we head into another year of AI headlines, it’s worth asking: Are we building the foundations for the next decade of productivity gains, or just inflating metrics temporarily? History suggests the difference matters enormously for investors.
The market is not going to let this happen indefinitely.
Those words should resonate. Because when the tide goes out, we see who’s been swimming without fundamentals. Better to heed warnings now than regret ignoring them later.
In the end, AI will change the world. The question is whether the path there is steady and sustainable—or punctuated by another painful reset. I’ve seen both scenarios play out before. This time, let’s hope cooler heads prevail before enthusiasm carries us too far.
What’s your take? Are these big AI deals signs of healthy innovation or echoes of past excess? The debate is heating up, and with trillions on the line, it’s one worth having.
