Markets love analogies. Every new wave of technology gets compared to the last. Today’s AI boom is framed as the dot-com bubble 2.0. But this framing is misleading. The pattern may look similar — speculative hype, inflated valuations, a crash, then a few dominant survivors — yet the environmental conditions are completely different.
The lesson is simple: technology advances regardless; valuations are hallucinations induced by monetary policy.
The internet boom unfolded in an era defined by low inflation, falling interest rates, and globalization.
Low Inflation: The Fed could keep rates low without consequence.
Falling Rates: Declining throughout the decade, lowering the cost of capital.
Globalization: Opening of markets, free trade, and offshoring.
Cheap Equity: Investors flooded any company with “eyeballs” and “mindshare.”
Light Infrastructure: The internet required software and minimal hardware buildout.
The result was predictable: growth over profits. Any .com could get funded, burn rate was a badge of honor, and metrics like “page views” replaced unit economics.
Most companies collapsed. Yet the survivors — Google, Facebook, iPhone-era Apple — reshaped society exactly as predicted. The technology was real; the hallucination was financial.
The 2020s AI Environment
The AI cycle looks like dot-com on the surface — soaring valuations, hype, and fear of collapse — but the macro environment is inverted.
High Policy Rates: From near-zero to 5.5% in 18 months.
Sticky Inflation: The Fed fighting hard to get inflation back to 2%.
Quantitative Tightening: Liquidity draining from the system.
Heavy Infrastructure: AI isn’t just code. It’s datacenters, GPUs, gigawatts of power, and global supply chains.
This shifts what matters. No longer “eyeballs” or “stickiness,” but:
Unit economics
Cash flow positive models
Control of compute and data
Energy access
The constraints are new: permitting delays, capital scarcity, and geopolitical chokepoints in semiconductors and energy.
Same Pattern, Different Rules
The dot-com crash didn’t invalidate the internet. It invalidated financial hallucinations. The same applies to AI:
1990s: Software could scale cheaply, but capital was infinite.
2020s: AI requires massive infrastructure, but capital is constrained.
In both cases, crashes don’t halt the trajectory of technology. They simply reveal that markets can’t priceinnovation without the Fed’s lens.
Why “It’s Not the Same Play” Matters
Superficially, the boom-bust pattern looks identical:
Rapid capital inflows.
Valuations detached from fundamentals.
Eventual crash.
Survivors dominate.
But in practice, the rules of the game have changed.
Valuations compress faster. With rates at 5%, the same $1 of future earnings is worth $0.61 today. At 0%, it was worth $1. This mathematical distortion is everything.
Survivors need cash flow sooner. Dot-com companies could bleed cash for years. Today’s AI firms must prove unit economics early.
Infrastructure is a moat. Building datacenters, securing compute, and locking energy contracts are as important as writing code.
Geopolitics drives outcomes. Unlike the open globalization of the 1990s, AI supply chains are fractured by export controls and national security priorities.
The Core Insight
Technology’s trajectory doesn’t change. The financial hallucinations do.
The internet transformed society despite the dot-com crash. AI will do the same, crash or not. What changes is who survives and how value accrues, determined by the monetary and geopolitical environment.
Implications for Builders and Investors
For Builders: Don’t chase hype metrics. Focus on real moats: compute, energy, data, and distribution. Cash flow matters again.
For Investors: Don’t misread a crash as the end of AI. Distinguish between valuation hallucinations and real adoption curves.
For Policymakers: Understand that restricting compute or energy access reshapes competitive advantage more than capital flows alone.
Historical Rhymes, Not Repeats
It’s tempting to see AI as dot-com all over again. But to do so is to confuse pattern with environment.
The pattern — boom, crash, consolidation — is real.
The environment — high rates, inflation, geopolitics, infrastructure constraints — makes the rules of survival completely different.
The survivors of this cycle won’t just be the best coders. They’ll be the ones who master energy contracts, navigate export controls, and prove unit economics in a high-rate world.
Closing Thought
Every crash has two truths:
Markets hallucinate.
Technology advances.
The dot-com collapse didn’t stop the internet. The AI correction won’t stop intelligence amplification. The only question is who adapts to the new rules of the game.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
