Artificial Intelligence (AI) has seen a significant rise recently, leading to comparisons with the dot-com bubble of the 1990s. However, experts believe that unlike the dot-com bubble, AI's growth is grounded in significant technological advancements with broad applications, making it more than just a speculative boom.
AI's growth mirrors dot-com bubble
The explosion of AI in popular culture and industry has led to comparisons with the notorious dot-com bubble of the late 1990s and early 2000s. Back then, internet-based companies were the subject of massive hype and investment. This sector peaked at a value of $2.95 trillion before plummeting to $1.195 trillion as capital vanished and investors bailed, causing many businesses to go under. The AI market, on the other hand, has demonstrated steady growth since 2021 and is predicted to reach a whopping $1.8 trillion by 2030.
Henry Nothhaft Jr., who's been in the AI industry since 2009 and founded the early AI software company Trapit, points out that both AI's growth and the dot-com bubble share key attributes. These include the scale of their impact on the economy and society. AI has been a particularly polarizing topic, prompting tech leaders like Elon Musk to issue warnings of impending doom while also investing in the sector. According to Nothhaft, both phenomena represent transformative technological innovations that redefine industries and change societal behaviors.
AI industry's harsh reality
Despite the hype, Nothhaft believes it’s premature to determine just how inflated expectations are for AI. He anticipates that most of the AI companies created during this period will fail. However, a small number of winners will emerge and shape the future of the industry. For instance, OpenAI’s chatbot ChatGPT launched in November 2022 and quickly became one of the fastest-growing web platforms in history, reaching 100 million monthly users by January 2023. However, its traffic has seen a dropoff recently, and rivals such as Google’s Bard, Microsoft’s Bing, and Character.ai have so far failed to match its success.
The rise of AI has also drawn parallels with another technology sector—crypto. Crypto has had its own remarkable rise over the last decade, reaching a total market cap of $3 trillion at its peak in November 2021 before losing more than half its value in 2022. Initial coin offerings (ICOs) and nonfungible tokens (NFTs) experienced boom periods, but Nothhaft argues that they are very different from AI. Unlike the crypto space, where the hype has often exceeded reality, the promise of AI is grounded in substantial technological advancements and nearly limitless applications.
AI's potential safeguards it from crash
Nothhaft asserts that AI won’t experience a crash on the same scale as the dot-com bubble. This is because, unlike the early years of the internet, which were more a period of exploration and novelty than utility, AI has already seen applications across a range of sectors, including media, healthcare, finance, transportation, and education. AI is delivering tangible value today and will soon become a ubiquitous part of the digital landscape, according to Nothhaft.
AI's growth driven by practical applications
Sam Huber, CEO of metaverse platform LandVault, offers a differing perspective. He agrees that AI’s growth is driven primarily by technological advances and practical applications. On the other hand, crypto and related assets, such as NFTs and ICOs, often attract speculative investments motivated by the prospect of quick financial gains. Huber argues that the value proposition of AI is its ability to improve and transform multiple industries, whereas cryptocurrencies serve primarily as decentralized digital currencies or investment assets.
Huber argues that AI's rapid growth is supported by tangible applications and use cases, with many companies incorporating AI into their operations and products. For example, the music and film industries have begun experimenting with AI. AI-generated songs are becoming impressively good, a development that the music industry might not be prepared for. Therefore, Huber contends that AI’s advancement is driven by practical utility rather than speculation alone.
Advancements in AI technologies fuel growth
Osman Masud, CEO of independent video game developer The Game Company, expresses a similar sentiment. He believes the growth of AI is being driven by advancements in technologies such as machine learning, deep learning, and neural networks, which continue to evolve and improve. With the potential to transform industries and improve efficiency, he expects the AI industry to continue to experience significant growth in the years to come rather than collapse.