Friday, November 21st, 2025
By Laura Kuntz, CPA/PFS, MBT, Chief Investment Officer
“Is there an AI bubble?” is a question I’ve been getting lately from clients. My answer is, “Yes, and it’s a good thing. It allows the technology to go down blind alleys and rabbit holes so that something new can be created.” Let’s look at technology history and how to invest during a time like this.
The Dot Com bubble of the late 1990’s saw the discovery of the internet which offered enormous potential for business and personal use. This era was “marked by a frantic surge in investment”1 which skyrocketed stock prices including many companies that had no profits and later went bust. At that time, I had a client who I believed had always been happy with a moderate risk portfolio and the commensurate moderate returns. However, at that time, along with other clients, I remember her sharing that, “My friends say I should invest in technology companies.” By the way, this was a hard time to be a financial advisor, because for many investors, risk came to mean nothing – it was all about return. FOMO — fear of missing out — ruled. For that client though, after a good deal of discussion, we did invest a little in pure tech, so she could participate, but not so much, in my opinion, as to hurt her long-term financial plan. As tech stocks burst in 2000+, I was glad to see that her financial plan continued in good shape.
So, there are booms that become bubbles. And there are busts. But, the capital invested during this overall cycle can create amazing new things, just as the internet was created during the Dot Com era. AI is following a somewhat similar path. The private companies that are creating AI tools such Open AI (creator of Chat GPT) and Anthropic (creator of Claude) are losing money hand over fist, AND plan to keep doing so. Open AI hopes to turn a profit in 2030, while Anthropic is targeting 2028.2
But, Open AI, Anthropic and their peers, are buying services from public companies such as chips from Nvidia and cloud storage from Microsoft, making these and other large tech companies a lot of money. Not surprisingly, the stock prices of those tech companies selling services to the AI creators have soared.2
Will private investors keep funneling capital to the AI creators? How long will investors accept these big losses? Will the AI start ups come up with products that are so compelling that the investors keep sending capital? Will those losses turn around over time? The capital investment required is big: Open AI alone projects its need at $150 billion before it turns a profit.2
From a product standpoint, AI does seem full of opportunity. We use Microsoft Copilot in our office, a secure form of AI. It has strong potential but still needs human supervision, and we believe it will likely improve. We think bots (really just fancy computer applications) are in their early stages and have strong potential. They automate a whole series of tasks. And, we think that robots – which are just physical material with a bot inside – are also on their way. But, right now, we are in the “frantic surge of investment” phase. And, some of that investment will work out, and a bunch will not.
The investing lesson from the dot com bubble – and dot com bust – is to put aside FOMO (fear of missing out) and stay diversified. To do what my client did at that time way back in the late 1990’s. Like her, you could pick up some of the exciting stuff, but make sure it’s not enough to harm your financial plan.
The real opportunity in AI will not so much be in the companies that create it, though a few will survive, even thrive, and will be valuable. The real opportunity will be investing in all of the companies that will use AI, just as we’ve seen the internet become an indispensable tool to every company. We don’t need to bet big on the bubble. We can invest a little in the bubble and around it, keeping our eye on where the game is going and on our own financial good.
FOOTNOTES
1 The Dot-Com Bubble: Lessons from the Boom and Bust of Internet Startups.
2 Big Tech’s Soaring Profits Have an Ugly Underside: Open AI’s Losses.
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