Market Jitters Over AI Bubble Echo Dot-Com Era

Recently, shares of AI-related companies in the United States have experienced steep declines as investors grew cautious about the sector’s rapid price increases. Growing skepticism about an “AI bubble” has been fueled by a wave of negative reports and rising concerns over inflated valuations.

SoftBank, which holds a wide range of investments across the AI ecosystem—including infrastructure, chips, and applications—has been significantly impacted. The company owns a controlling stake in Arm Holdings, the UK-based chip designer behind many mobile and AI processors, and this year it also acquired Ampere Computing to boost its data center capabilities. Arm’s shares, traded on Nasdaq, dropped 4.71% overnight. SoftBank also backs major AI model developers such as OpenAI, along with startups like OpusClip, a generative AI video-editing firm, and Tempus AI, which applies machine learning in precision medicine.

Within two days, SoftBank’s market capitalization fell by $50 billion, following a 7% share decline on November 4. The downturn extended to other tech giants—Samsung Electronics and SK Hynix each saw their stock prices tumble nearly 6%, while Chinese firms Alibaba and Tencent slipped more than 3% and 2%, respectively. In the US, Palantir shares dropped 8% despite reporting stronger-than-expected quarterly results, as investors worried about excessive valuations. According to FactSet, AI-driven optimism has pushed the S&P 500’s forward price-to-earnings ratio above 23, its highest level since the dot-com bubble burst in 2000.

Market strategist Louis Navellier warned that a correction in AI stocks could drag down broader markets, given the heavy influence of major players like NVIDIA, now valued at over $5 trillion. Some analysts even compare current AI stock valuations to the late-1990s dot-com mania. Investor Michael Burry, known for predicting the 2008 financial crisis, has taken short positions against companies such as Palantir and NVIDIA. Still, others, like Dan Ives of Wedbush, view the sell-off as temporary, suggesting it reflects investors’ short-term risk aversion rather than a lasting downturn.