Is market heading towards a big AI crash like the dot-com crisis? Here's what European Central Bank predic - The Economic Times

The European Central Bank has entered the debate over frothy technology valuations, drawing a cautious parallel between today's artificial-intelligence rally and the dot-com boom of the late 1990s. While the bank does not predict an imminent crash, its warning underscores a familiar risk: investors are pouring capital into AI infrastructure on the assumption of future returns, much as they once did with early internet companies. The concern is less about the technology itself and more about the price being paid for it before those profits materialise.

For markets, the relevance lies in concentration. A handful of mega-cap tech names now drive a large share of index gains, which means a sudden reassessment of AI earnings potential could ripple across broad benchmarks. Unlike the dot-com era, however, today's AI leaders are generally cash-generative and profitable. What investors will likely watch is whether capital expenditure on AI continues to translate into measurable revenue growth, and whether interest rates remain high enough to challenge speculative valuation multiples. The ECB's remarks serve as a reminder that central banks are monitoring asset prices, even as they balance inflation and growth objectives.