AI boom revives dot-com bubble fears

"There is no SOXL in my portfolio. I don't own enough SOXL. I sold SOXL too early."

The phrase has become a common refrain in stock-investing forums. SOXL is an exchange-traded fund designed to deliver three times the daily return of the Philadelphia Semiconductor Index. When the index rises 1%, SOXL typically gains about 3%. The reverse is also true, making it a high-risk investment with the potential for outsized returns.

On Sept. 2 last year, SOXL traded at $25.25. By June 2, it had climbed to $266.32 in New York, rising more than tenfold in just nine months. It is the sort of performance legendary investor Peter Lynch had in mind when he coined the term "tenbagger" for stocks that increase tenfold or more. Investors who held SOXL have reaped extraordinary rewards. Those who did not may find the rally difficult to ignore.

The gains have not been limited to SOXL. Shares of major U.S. chipmakers held by the fund, including Nvidia, Micron, AMD, Intel and Marvell, have also surged. Semiconductor stocks are leading market advances not only in South Korea, where Samsung Electronics and SK hynix have been at the forefront, but also in Japan and Taiwan.

The driving force behind much of the rally is the artificial intelligence boom. Companies producing specialized chips such as GPUs, NPUs and high-bandwidth memory, or HBM, have seen their valuations soar as demand grows for hardware capable of handling increasingly complex AI workloads while improving energy efficiency. The momentum has spread well beyond chipmakers themselves, lifting shares of companies connected to the AI industry in a variety of ways.

Some investors see uncomfortable parallels with the dot-com bubble of the late 1990s and early 2000s. They argue that markets are being propelled by enthusiasm for AI despite high energy prices, wars and geopolitical tensions that hardly provide an ideal environment for business. Among those sounding the alarm are Michael Burry, who built his reputation by betting against the housing market before the 2008 financial crisis, and veteran hedge fund manager Paul Tudor Jones.

A similar pattern emerged about a quarter-century ago. Companies with little revenue and virtually no profit became market darlings simply by adding ".com" to their names. Investment capital poured in, and initial public offerings arrived in rapid succession. Yet steep climbs often precede painful declines. The Nasdaq Composite Index, which rose above 5,000 in March 2000, tumbled to about 1,100 within two years. Roughly $5 trillion in market value was wiped out during that period.

There are important differences, however. The dot-com boom was driven largely by startups, while today's AI surge is being led by global technology giants worth trillions of dollars. And unlike many internet-era companies, whose appeal rested largely on rising traffic and user growth, today's AI leaders are commercializing technologies that are already reshaping everyday life.

Another difference is the degree of polarization emerging alongside the boom. Recent disputes over bonus payments at Samsung Electronics and SK hynix offer a glimpse of the trend. Inequality has challenged societies throughout history, but calls for a "grand social compromise" over bonuses paid by private companies highlight how sharply the divide has widened. The debate itself reflects both the growing concentration of gains and one of the broader consequences of the AI boom.