AI Bubble Warning: Why the Next Tech Crash Could Be Worse Than the Dot-Com Bust

The Potential Crash of the AI Boom: What Finance Professionals Need to Know

Tech expert Erik Gordon warns that the AI boom could lead to a financial crash even more severe than the dot-com bust. Gordon, a professor at the University of Michigan specializing in financial markets and technology, points to recent stock movements as clear signs of the risks involved.

Insider reports highlight Gordon’s description of the AI surge as an “order-of-magnitude overvaluation bubble.” He uses the example of CoreWeave, an AI infrastructure startup, whose shares plunged 33% in just two days, erasing roughly $24 billion from its market value.

CoreWeave’s Market Drop: A Warning Signal

CoreWeave’s dramatic decline isn’t just a minor hiccup. Gordon compares the company’s lost market cap to Pets.com, a notorious symbol of the dot-com bubble. The scale of CoreWeave’s loss is nearly 60 times Pets.com’s peak valuation. Even after the drop, CoreWeave’s stock closed around $100 per share—more than double its initial listing price of $40.

Gordon states, “It takes a hype-driven tech stock to instantly destroy $20 billion in wealth.” This signals that if the AI bubble bursts, more investors could face heavier losses than those during the dot-com collapse.

What This Means for Investors and Finance Professionals

• Overvaluation risks: The AI market’s rapid rise has created inflated valuations that may not be sustainable.
• Volatility ahead: Sharp declines like CoreWeave’s could become more common if market sentiment shifts.
• Wider impact: Losses could surpass the dot-com crash in both size and scope.

For finance professionals, this means vigilance is critical. Careful analysis and risk management should guide AI-related investments. Understanding the underlying fundamentals rather than getting caught up in hype can help protect portfolios.

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The CoreWeave case serves as a stark reminder: the AI boom is still unfolding, but its financial risks are very real. Staying alert and grounded in facts can help finance professionals prepare for whatever comes next.