By now, one must have read a lot of financial news, social media posts and videos, and of course blogposts about the inflating bubble in the artificial intelligence (AI) sector and its related industries. Not missing out on the bandwagon, I decided to write a short post on my thoughts.
Some analysts and fund managers were warning of a potential AI bubble coming like the dot-com bubble that happened at the turn of the century, and recent news reports are fuelling this viewpoint. To name a couple, a recent MIT study had found 95% of enterprise AI projects failed to turn a profit1, and there were the reported interconnected business deals between AI-related companies (e.g. the Nvidia-Oracle-Open AI circular deal) not dissimilar to those made in the late 1990s.
Should the bubble explode, the notion is that not just AI stocks are going to get hit the hardest, but there would be a ripple effect across the entire equities market as seen in 2000 and 2008. Every sector and industry would be hit at least for that moment as market participants are chasing for liquidity at the first instance (which I had explained here before), so expect a counter that has nothing to do with AI would go down temporarily.
It is beyond our pay grade (and divinity grade) to know whether the whole thing is going to burst, but here are some of my takes going forward and how best to prepare for the eventuality occurring.
#1: AI Is Not New
There were at least two investors whom I had spoken to have the impression that AI started in November 2022, which was around the launch date of Chat GPT and thus sparking off the entire revolution. However, AI already had its roots back in the 1950s and slowly evolved over the decades. The advances of processing power and large amounts of data and information available provided the growth catalysts needed, especially in the domain of generative AI via large language models (LLMs) that most layman people know about.
#2: Sectoral Sensing
Using November 2022 as the cut-off time, we shall look at a proxy counter that could be considered a part of the AI-boom: Keppel DC REIT (KDC). After listing in December 2014, its first steep rise was not during 2022, but a bit further back in the second half of 2019, reaching its twin peaks in 2020 to 2021. This was the COVID-19 and its immediate aftermath period, when working from home was seen as the way-to-go and the importance of platforms supporting it, thus the need for more server space.
After the launch of Chat GPT and the sensing of everything AI has heightened, KDC managed to go up gradually, likely due to the tampering effects of interest rate hikes, now at price levels not reached since late 2021, so in a way the AI boom is probably not as strong as the upshot brought about by COVID-19.
While it may sound prejudiced to use just one counter for comparison, the message is that data centres had shown its relevance in our already digitally connected world. AI just served to add on a huge demand for them.
#3: Cusp Of A New Era?
One of the main reasons for the dot-com bust was the insatiable appetite of everything and anything internet, even on companies that had no revenue or products to show for. In other words, what the investors did were ploughing into potentials, hopes and dreams, or worse, castles in the air.
This parallel was echoed by the people who were convinced of the bubble, and the 95% MIT report did not help in alleviating the thought. With the “all-things-internet” and a slew of accompanying features like social media, e-commerce and “everything” platforms (e.g., WeChat, Grab, etc.), one could say that the 2000 crash brought about the beginning of a new period, and investors back then were “too early” in their calls.
Coming back to the present, though there are not many useful use cases for AI, we are, by my reckoning, still in the tail end of the early adoption stage. Sure, there were news of companies firing staff due to being replaced by AI, only to recall them back when their AI initiatives failed (likely the 95%), but learning, like the AI technology, is evolving, and companies and people would adapt them holistically, sooner or later. So, we may be seeing the cusp of a new era unfolding.
#4: Stay Diversified
Coming from me, this is a must-have in my blog posts about bubbles and crashes. In the very short run, everything seems to be going down in a crash, but eventually some would rise faster than others due to their distance from the epicentre of the bubble explosion, i.e., correlation.
Some had advocated going into different sectors and industries for diversification, but I would prefer to go on a higher degree and that is asset classes, because their correlation is more varied due to the different behaviour in different market conditions. While there is undoubtedly damage felt in the portfolio from the burst if it happens, it would probably be lighter as different asset classes react differently to the situation.
Disclosure
The Bedokian is vested in Keppel DC REIT, Nvidia and Grab.
1 – Estrada, Sheryl. MIT report: 95% of generative AI pilots at companies are failing. Fortune. 18 Aug 2025. https://fortune.com/2025/08/18/mit-report-95-percent-generative-ai-pilots-at-companies-failing-cfo/ (accessed 11 Oct 2025)
