Similar to the dot-com era, the current AI investment cycle is expected to produce a high number of company failures alongside a few generational winners that create more value than ever before in venture capital history.

Current AI investment patterns mirror the "round-tripping" seen in the late '90s tech bubble. For example, NVIDIA invests billions in a startup like OpenAI, which then uses that capital to purchase NVIDIA chips. This creates an illusion of demand and inflated valuations, masking the lack of real, external customer revenue.

The market rally is concentrated in AI stocks dependent on a massive infrastructure build-out. Historically, such capital-intensive ventures, like railroads and the internet, often cause widespread bankruptcies when revenue fails to grow fast enough to cover costs.

Massive upfront capital expenditure (CapEx) for AI infrastructure creates a timing gap before revenue materializes. This mirrors historical bubbles like the dot-com and railroad eras, where the technology succeeded but early investors were wiped out waiting for returns.

The AI industry is exhibiting signs of a dot-com-style bubble correction. After a frenzy of investment in infrastructure (supply), delayed IPOs and strategy pivots from companies like Meta and xAI suggest that end-user demand is not materializing as quickly as projected.

Tech giants are spending hundreds of billions on AI infrastructure with slow initial results, reminiscent of the Web 1.0 era's overbuild of fiber optic networks. This parallel suggests a potential AI bubble where the infrastructure is built, but the equity holders who funded it get crushed in a market correction.

The current AI market correction is mirroring the dot-com bubble's staged collapse. First, consumer AI (OpenAI) faces pressure. Next, enterprise AI (Anthropic) will correct. The final shoe to drop will be the infrastructure players like NVIDIA, which were the last to fall in the previous cycle.

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.

Even if the current AI boom is a bubble that bursts, the outcome is a net positive for society. Like the railroad and dot-com bubbles, massive investment creates infrastructure (data centers, models) that will fuel future innovation for everyone, even if some investors lose money.