AI Bubble Warning: Bank of England Fears Repeat of Dot-Com Crash
Is the next stock market crash imminent? In any case, the Bank of England is sounding the alarm: AI valuations are reaching dotcom levels. OpenAI costs $500 billion with a $5 billion loss. Experts are therefore warning of an abrupt market correction like in 2000.
Warning about overheated AI markets
The Bank of England warns that current valuations of technology companies are approaching the levels of the dot-com bubble of 25 years ago. The risk of a market correction has increased, the British Financial Stability Committee warned in its latest report. The focus is particularly on companies with a focus on artificial intelligence. Valuations appear stretched, especially for tech companies focused on AI. This leaves equity markets vulnerable to setbacks if expectations about AI’s impact become less optimistic.
The British central bank sees the risk that a correction in AI stocks could have far-reaching consequences for global financial markets. As the Financial Times reports, Kristalina Georgieva, managing director of the International Monetary Fund, also warned of the risks. The optimistic market sentiment regarding the productivity-enhancing potential of AI could “suddenly change” and hit the global economy.
OpenAI as an extreme example
A prominent example of overheated valuations is OpenAI: The company recently reached a valuation of 500 billion dollars (around 430 billion euros). This significantly exceeds the previous valuation of 300 billion dollars (around 258 billion euros) from a financing round at the beginning of the year. OpenAI already generated 4.3 billion dollars (about 3.7 billion euros) in sales in the first half of 2025 – 16 percent more than in the whole of 2024. The 500 billion valuation corresponds to a 39.4 times multiplier of the forecast sales for 2025. At the same time, the company recorded losses of five billion dollars on sales in 2024 of $3.7 billion. During the dot-com bubble, companies reached similarly extreme valuations before spectacularly collapsing.
The euphoria surrounding AI technologies is dampened by sobering studies. Research from the Massachusetts Institute of Technology showed that 95 percent of organizations see zero return on their investments in generative AI. This is fueling fears that stock market valuations could collapse if investors become disappointed with the progress or acceptance of AI technology. In addition, the Bank of England sees further risk factors: material bottlenecks in AI progress – from electricity, data or raw material supply chains – as well as conceptual breakthroughs that change expected AI infrastructure requirements could also damage valuations.
However, Nvidia boss Jensen Huang contradicted the bubble comparisons. The current AI boom is “dramatically different” than the dot-com bubble because the “hyperscalers” like Microsoft, Google and Meta are much richer than companies like pets.com at the time. However, critics object that even during the dot-com era, established companies such as Cisco and Intel achieved extreme valuations before their share prices fell by over 80 percent. The Bank of England’s warning shows that the AI hype could be expensive.
