An AI stock market bubble, like the dot-com bubble of the late 90s, is primarily equity-financed, not debt-financed. Historically, the bursting of equity bubbles leads to milder recessions because they don't trigger systemic failures in the banking system, unlike collapses fueled by debt.

Today's massive AI company valuations are based on market sentiment ("vibes") and debt-fueled speculation, not fundamentals, just like the 1999 internet bubble. The market will likely crash when confidence breaks, long before AI's full potential is realized, wiping out many companies but creating immense wealth for those holding the survivors.

Unlike the leverage-fueled dot-com bubble, the current AI build-out is funded by the massive cash reserves of big tech companies. This fundamental difference in financing suggests a more stable, albeit still frenzied, growth cycle with lower P/E ratios.

The current AI boom is more fundamentally sound than past tech bubbles. Tech sector earnings are greater than capital expenditures, and investments are not primarily debt-financed. The leading companies are well-capitalized with committed founders, suggesting the technology's endurance even if some valuations prove frothy.

Unlike the dot-com or shale booms fueled by less stable companies, the current AI investment cycle is driven by corporations with exceptionally strong balance sheets. This financial resilience mitigates the risk of a credit crisis, even with massive capital expenditure and uncertain returns, allowing the cycle to run longer.

This AI cycle is distinct from the dot-com bubble because its leaders generate massive free cash flow, buy back stock, and pay dividends. This financial strength contrasts sharply with the pre-revenue, unprofitable companies that fueled the 1999 market, suggesting a more stable, if exuberant, foundation.

The current AI boom may not be a "quantity" bubble, as the need for data centers is real. However, it's likely a "price" bubble with unrealistic valuations. Similar to the dot-com bust, early investors may unwittingly subsidize the long-term technology shift, facing poor returns despite the infrastructure's ultimate utility and value.

Unlike the 2008 financial crisis, which was a debt-fueled credit unwind, the current AI boom is largely funded by equity and corporate cash. Therefore, a potential correction will likely be an equity unwind, where the stock prices of major tech companies fall, impacting portfolios directly rather than triggering a systemic credit collapse.

Unlike the dot-com bubble, which was fueled by widespread, leveraged participation from retail investors and employees, the current AI boom is primarily funded by large corporations. A downturn would thus be a contained corporate issue, not a systemic economic crisis that triggers a deep, society-wide recession.