Evaluating the AI boom through the lens of the Telecom Bubble

Abstract

This study investigates the ongoing surge in Artificial Intelligence stocks by comparing it with the Telecom bubble. The central research question of the study is if the current gains in AI stock valuations are directed by fundamental company performance or if it mimics the speculative investor behaviour seen in the Telecom bubble. Using a mix of quantitative and qualitative methods and analysis, the study uses stock analysis, and benchmarking towards financial indices and examines macroeconomic factors that could affect the outcome. The research data is gathered from credible databases on companies and macroeconomic factors such as interest rates and inflation in both eras. The results reveal compelling similarities in investor behaviour and the dynamics of the financial markets in both periods, suggesting that the current AI boom has characteristics of a speculative bubble. The implications of this study are critical for stakeholders within the financial markets such as investors, policymakers and financial analysts. By identifying patterns and similarities in booming industries can stakeholders better anticipate market corrections and mitigate the economic consequences. This study highlights the importance of continuous research in the financial markets to understand and monitor investor psychology to avoid future financial crises similar to the Telecom bubble.