From Dot-Com to AI: A Comparative Journey Through Tech Revolutions | 日志

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The comparison between the internet boom in the early 2000s and the recent proliferation of artificial intelligence (AI) over the past 18 months reveals some similarities and differences. In the early 2000s, investors blindly pursued dot-com companies, leading to a bubble that eventually burst. Currently, over 80% of the deals venture capital firms consider are related to AI. The AI boom is being primarily driven by the increasing amount of data available for training AI models, enabling complex tasks like image recognition and predictive analytics especially in the medical and healthcare sector.

I would like to discuss the similarities and differences between now and the early 2000s:

Similarities:

· Investor Frenzy: Both periods witnessed frenzied investor interest, with significant capital flowing into internet-based companies in the early 2000s and AI startups more recently.

· Potential Bubble: Concerns have been raised about a potential bubble in both scenarios, with fears of overvaluation and unsustainable growth. If we take a look at the stock performance of Cisco and NIVIDA, there are all considered as the best player in those markets and Cisco’s stock price had dropped from approx. US$79 (Mar 2000) to US$9 (Sept 2002) after the dot-com bubble (Cisco's stock price is around US$48 at the end of Feb 2024).

Differences:

The race for AI dominance but who will win the race?

· Market Conditions: The current market conditions suggest that AI enthusiasm differs from the dot-com bubble, with fewer tech IPOs and more established players in the AI space.

· Established Companies: The AI sector sees more established companies benefiting from AI technologies, unlike the proliferation of new, unproven companies during the dot-com era.

· Valuations: Valuations in the AI sector are currently lower than those during the dot-com bubble, indicating a more cautious approach by investors (or we are not at the peak yet!).

While there are concerns about a potential AI bubble, experts like Wharton's Jeremy Siegel believe that it's not a bubble (yet) and foresee a Big Tech boom fueled by AI.

People and our society suffered from the major stock market crash following the dot-com bubble burst in the early 2000s, but we are now already living in an age that no one could live without the Internet. Whether you like it or not, AI and more powerful AIs (models and applications) will be here to stay. However, on top of the development of AI, I would like to draw everyone’s attention to risks such as proliferation of false information, and fraud accompanying the AI boom (e.g. the emergence of OpenAI’s Sora). These are the major issues we need to be aware of given we WILL be living in the age of AI from now on.

Thomas Kwan

Managing Director of Odysseus Capital Asia Limited

Thomas has been in the industry for more than 20 years and has extensive experience in the Greater China region. Thomas’ expertise includes leading M&A transactions, both buy and sell-side, fund-raising projects and advisory services including deal origination, target identification, business strategy advice, structural and regulatory advice and pricing and negotiation strategy.

Uploaded on 21 April 2024.