Why Comparing Today's AI Boom to the Dot-Com Crash Misses the Biggest Picture

Yeah, there’s probably some bubble energy in AI stocks right now. Some of them are definitely stretched on valuation—looking at you, unprofitable companies burning cash while riding hype.

But here’s the thing people keep getting wrong: not all AI stocks are created equal, and the comparison to the dot-com bust has a critical blind spot.

The One Factor That’s Completely Different

Dot-com bubble popped in March 2000 because the Fed was aggressively tightening—rates went from 4.75% to 6.50% between mid-1999 and mid-2000. Rising rates kill two things speculators need:

1. Cheap borrowing — suddenly expensive
2. Appetite for growth bets — bonds start looking sexy again

The Fed even kept raising after the crash crashed (including a half-percent hike in May 2000), which basically poured gasoline on the fire. That policy mistake cascaded into a recession that lasted until 2001.

Today’s Environment? Completely Different

Fast forward to 2024-2025, and we’re in cutting mode:

• 2024: Three rate cuts (0.50% in Sept, then 0.25% in Nov & Dec)
• 2025 so far: Two more cuts (0.25% each in Sept & Oct)

The Fed’s basically doing the opposite of 2000. Rate cuts support growth stocks and speculative plays—they make borrowing cheaper and bonds less attractive.

December’s FOMC meeting? Market odds of another 0.25% cut jumped from 50% a week ago to 84% as of late November. That tailwind remains.

The Real Takeaway

Yes, some AI darlings are overvalued. Yes, due diligence matters (watch out for “growth” that’s just M&A masquerading as organic). But the structural backdrop that killed the dot-com bubble—rising rates forcing capital out of growth—simply doesn’t exist right now.

That’s not permission to YOLO into every AI stock. It’s just context that the playbook from 2000 doesn’t automatically apply in 2025.