ANALYSIS

Authors: Peter Armstrong

Publisher:

CBC

Published: 8/14/2025

Language:English

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Aura Windfall

Good morning 老王, I'm Aura Windfall, and this is Goose Pod for you. Today is Wednesday, August 27th. We're diving into a topic that’s on everyone’s mind, and it comes from CBC News: "ANALYSIS | Stocks are soaring, fuelled by AI investments. Can it last?"

Mask

I'm Mask. We're here to cut through the noise. Is this the next great technological revolution, or are we just watching capital get vaporized in the biggest bubble we've ever seen? The stakes are astronomical, so let's get into it. The answer matters.

Aura Windfall

Let's get started. The energy around AI feels electric, but there's also a deep current of anxiety. I was reading a piece from Erik Gordon at the University of Michigan, and his words were truly chilling. He called this an "order-of-magnitude overvaluation bubble."

Mask

"Chilling" is for people who are afraid to make big bets. Gordon thinks the AI boom will dwarf the dot-com crash. Of course it will. The scale is bigger, the ambition is bigger, and the potential impact is world-changing. He’s looking at the past, not the future.

Aura Windfall

But what I know for sure is that when bubbles burst, real people get hurt. He's warning that the financial fallout could be much greater than the dot-com bust. He mentioned startups like CoreWeave could create bigger losses than Pets.com ever did. That's a powerful warning.

Mask

Pets.com was a rounding error. We're talking about foundational technology. Look at a company like Perplexity, a search startup. They're already seeking funding at a twenty billion dollar valuation. That’s not hype, that's a statement of intent. They are building the future of information.

Aura Windfall

Twenty billion dollars is an incredible vote of confidence, but it also speaks to the immense pressure on these companies to deliver. And it’s not just about software, is it? There's a very real, physical constraint that feels like a huge elephant in the room.

Mask

The power grid. It’s a bottleneck, no question. Goldman Sachs is right to point it out. AI’s demand for energy is insatiable, and our grid is fragile. But that’s not a reason to stop, it’s a reason to build. Problems are just opportunities in disguise.

Aura Windfall

I see it as a profound challenge to our sense of balance. McKinsey projects a 6.7 trillion dollar investment in data centers by 2030. In Ohio, people's electricity bills are already rising. How do we pursue this incredible future without leaving people behind or straining our resources?

Mask

You innovate. You build your own power plants if you have to. The U.S. grid has a 15% reserve margin, China has nearly 100%. This isn’t just about economics, it’s about competitive survival. Weakness is a choice. We have to choose to be strong and build the infrastructure required.

Aura Windfall

It just feels like we’re accelerating so quickly. Michael Hartnett from Bank of America pointed out that the S&P 500's price-to-book ratio is at a record high, even higher than during the dot-com peak. It really makes you pause and ask if we've learned anything.

Mask

Learning isn't about avoiding risk, it's about taking smarter risks. The market is rewarding companies with tangible results. Look at the second quarter of 2025, the Nasdaq was up 17%. AI semiconductor stocks? A mean return of 37%. This isn't just hype; it's proof of performance.

Aura Windfall

That’s a powerful point. Investors are shifting from "AI potential" to "AI proof." They want to see real revenue and platform control. It’s a move from dreaming about the future to actually building it, which I think is a transition we can all feel grateful for.

Aura Windfall

To truly understand this moment, I think we have to look back. What I know for sure is that history is one of our greatest teachers. The dot-com bubble of the 1990s feels like such a clear echo of what we're experiencing today, with that same intoxicating mix of hope and speculation.

Mask

It was a necessary fire. The internet was a new frontier, and there was a massive land grab. Of course, there was speculation. The NASDAQ shot up from 750 to over 5,000 in a decade. That’s not a bubble, that’s a rocket launch. Some rockets explode on the pad. It’s part of the process.

Aura Windfall

But the explosion was devastating. When that rocket fell back to Earth, the NASDAQ lost 78% of its value by 2002. It triggered a recession. Many people lost their savings, their dreams. It took fifteen long years for the index to climb back to its previous peak. That’s a generation of waiting.

Mask

And in that time, the weak companies were wiped out. The strong ones, the Amazons and Apples, became titans. The crash cleared the field for the serious players. It was a painful but essential market correction that separated the visionary companies from the ones just riding a wave of hype.

Aura Windfall

It's true that giants were forged in that fire. But I wonder about the human cost. We saw so many companies with billion-dollar valuations just vanish. It makes me question the very nature of "value." Was it ever real, or was it just a shared belief that evaporated overnight?

Mask

The value was in the technology. The internet was real. The companies that failed simply had flawed business models. They didn't know how to monetize the new paradigm. Today's AI leaders, unlike those dot-com startups, are already massively profitable. They have the infrastructure and the customers. It's a different game.

Aura Windfall

That is a significant difference. Today’s players are established giants, not just startups in a garage. But the core emotion feels similar. That fear of missing out, the rush of capital into a space that, let's be honest, most people don't fully understand. That feels very familiar.

Mask

Fear of missing out is just another term for ambition. People see a paradigm shift and they want to be part of it. The dot-com bubble was built on the promise of a new economy. The AI boom is built on the promise of a new intelligence. The scale of the latter is infinitely greater.

Aura Windfall

Thinking about that time, it's almost like a fever dream. The NASDAQ climbing 80 percent from 1995 to 2000 alone is staggering. It shows how powerful a narrative can be. The story of the "new economy" was so compelling that it overshadowed the fundamentals for a while.

Mask

Narratives drive progress. You need a big story to mobilize that much capital and talent. The narrative wasn't wrong, just the timeline and some of the players. The internet did change everything. It just took longer and required more discipline than the early speculators thought. AI will be the same, but faster.

Aura Windfall

It's interesting you mention discipline. After the crash, companies like Cisco, Intel, and Oracle lost over 80% of their value. They were blue-chip stocks, not fly-by-night startups. It shows that even the most established players can get swept up and then punished by the market's sentiment.

Mask

And they survived. They tightened their belts, focused on real value, and came back stronger. The crash forced discipline. It was a stress test for the entire sector. The companies that passed that test are the ones that define the technological landscape we live in today. That’s the lesson.

Aura Windfall

So the lesson is one of resilience. It took 15 years to recover, which is a testament to the enduring power of the technological shift. It reminds me of the Japanese bubble in the 80s, which led to their "Lost Decade." These events have such long, profound shadows.

Mask

Exactly. These are generational events. They reshape the economic landscape for decades. You can either be scared of the volatility and hide, or you can understand the fundamental shift that's happening and position yourself for the inevitable future. The AI boom is the biggest shift yet.

Aura Windfall

This brings us to the heart of the conflict today. There are so many brilliant people on completely different sides of this. We have experts like Viktor Shvets telling investors not to worry too much about an AI bubble, suggesting the transformation is real and significant. It's a comforting thought.

Mask

Shvets sees the big picture. Worrying about a bubble is like worrying about turbulence when you're on a rocket ship. The point isn't the bumpy ride, it's the destination. The focus should be on the immense, world-altering potential of this technology, not short-term market fluctuations.

Aura Windfall

But then you hear another voice, a counterpoint that gives you pause. A recent article pointed out that for all the trillion-dollar valuations, the evidence of a real boost to productivity is still "thin on the ground." That disconnect between valuation and tangible output is where the anxiety lives.

Mask

That’s incredibly short-sighted. You don't build a skyscraper and expect to rent out the penthouse the next day. We are in the foundation-laying phase. The investment comes first, the productivity gains follow. It's a lagging indicator. People said the same thing about the internet and electricity.

Aura Windfall

I understand that, but the scale of the investment demands scrutiny. The article mentioned how the emergence of a single Chinese AI firm, DeepSeek, was enough to trigger a selloff in Nvidia and other US tech giants. It shows how sentiment is still so fragile and competitive.

Mask

That’s not fragility, that’s a healthy, competitive market. The appearance of a powerful rival forces everyone to sharpen their game. It validates the space. A monopoly would be far more dangerous. The fact that multiple players are leapfrogging each other proves this isn't a winner-take-all mirage.

Aura Windfall

What I know for sure is that people are looking for the "why" behind the numbers. It’s not just about stock prices; it's about how this technology will fundamentally change our work and our lives. The debate seems to be about the timeline. Is the revolution now, or are we just paying for a promise?

Mask

We are paying to build the promise. The gains will be distributed over time, but the groundwork has to be laid now. Complaining about a lack of productivity gains today is like planting a forest and complaining you don't have shade the next day. It's a failure of imagination.

Aura Windfall

So you see this as a period of necessary faith, an investment in a future that isn't fully visible yet. The conflict isn't about whether AI is powerful, but about whether our current valuation of that power is accurate or dangerously inflated. It’s a multi-trillion-dollar question.

Aura Windfall

Let's talk about the impact this is already having. It's not just theoretical. We're seeing a massive wave of capital expenditure from companies like Alphabet, Meta, and Microsoft. The scale is hard to comprehend. Their spending on data centers is reshaping the economy.

Mask

It's responsible for a third of America's economic growth in the last quarter. That's not a bubble, that's a boom. This spending isn't just numbers on a spreadsheet; it's concrete, steel, and fiber optics. It's the physical infrastructure of the next generation of industry.

Aura Windfall

And it’s predicted that this could reverse the productivity slowdown we've seen since the 90s. Goldman Sachs estimates AI could boost U.S. labor productivity by 1.5% annually. Imagine what that means for prosperity, for opportunities. It’s a very hopeful vision.

Mask

Hope is irrelevant. It's about execution. The "productivity J-curve" suggests a lag, but AI will compress that. What took the PC 15 years to deliver, AI might do in 7. We're already seeing it. The Fed noted workers using generative AI are 33% more productive per hour. The data is already here.

Aura Windfall

And it's creating a divide, isn't it? Companies that are "AI leaders" are already pulling away, with 50% higher revenue growth. This brings up a deep question of equity. How do we ensure that these incredible gains don't just benefit a handful of companies at the top?

Mask

Competition solves that. The benefits will flow to the companies that adopt it, forcing others to keep up or become irrelevant. This is evolution. In finance, manufacturing, e-commerce, the gains are already undeniable. You can't stop progress to ensure everyone feels included. You adapt or you fail.

Aura Windfall

But what about people's jobs? There's so much fear around replacement. The World Economic Forum has a more optimistic take, projecting that AI will create a net growth of 78 million jobs by 2030. It seems to be more about transforming tasks than eliminating roles entirely.

Mask

Of course. This isn't about replacement, it's about augmentation. It automates the mundane, freeing up humans to focus on higher-level problems. New roles are already emerging: AI specialists, big data experts. Technological revolutions have always driven job creation, this one will be no different. It just requires a new skillset.

Aura Windfall

Looking toward the horizon, the numbers are just breathtaking. Grand View Research projects the AI market will hit 1.77 trillion dollars by 2032. That's not just growth; it's a fundamental reordering of the global economy. It’s a testament to the human spirit of innovation.

Mask

It's a CAGR of over 29%. And Bloomberg's projection is just as aggressive: a 1.3 trillion dollar market in the next decade, up from just 40 billion in 2022. This isn't a trend. It's a tsunami. You either learn to surf or you get washed away. There is no middle ground.

Aura Windfall

And it will touch every part of our lives. I was so inspired to read about the AI in Genomics market. The idea of using this power to accelerate drug discovery and personalized medicine, that’s where the true purpose lies. It could change the future of human health.

Mask

That market is growing at 43% annually for a reason. It’s where the most complex data problems exist, and AI is the key to unlocking them. But all this growth comes with a cost. That report on data-center electricity consumption is a critical warning. The energy demand is a real challenge.

Aura Windfall

It's a powerful reminder that all this digital growth has a physical footprint. Doubling energy use to 4% of the global total by 2030 is a call to action. It asks us to innovate not just in AI, but in sustainability, ensuring our progress doesn't come at too high a cost to our planet.

Aura Windfall

So we're left with this beautiful, tense question: Is this a sustainable revolution or a precarious bubble? What I know for sure is that the conversation itself is shaping the future. It’s a story of immense ambition meeting very real-world limits. It’s a fascinating time to be alive.

Mask

That's the end of today's discussion. Thank you for listening to Goose Pod. See you tomorrow.

## Analysis: Is the Stock Market in an AI Bubble? **News Title:** ANALYSIS | Stocks are soaring, fuelled by AI investments. Can it last? **Report Provider:** CBC News **Author:** Peter Armstrong **Date:** Published August 14, 2025 (content likely reflects recent market activity) **Topic:** Business / Markets --- ### Executive Summary The stock market is experiencing significant gains, largely driven by investor enthusiasm for Artificial Intelligence (AI). Major tech companies like Meta, Amazon, Google, and Nvidia are at the forefront of these surges, fueled by the promise of AI transforming businesses. However, concerns are mounting that the current market resembles the dot-com bubble of the late 1990s, with some experts warning that the current overvaluation of top companies could lead to an even more severe market correction. While similarities exist, proponents of the AI rally point to the profitability and established customer bases of current tech giants as a key differentiator from the dot-com era. The impact of trade wars and tariffs also presents a more immediate threat to market stability. --- ### Key Findings and Conclusions * **AI-Driven Market Surge:** The stock market is reaching new all-time highs, primarily propelled by a select group of companies heavily invested in AI. * **Dot-Com Bubble Parallels:** Many experts observe striking similarities between the current AI-fueled market and the conditions leading up to the dot-com bubble burst in the early 2000s. * **Potential for Severe Correction:** Torsten Sløk, chief economist at Apollo, notes that the top 10 companies in the S&P 500 are currently *more overvalued* than they were during the 1990s IT bubble, suggesting a potential for a worse market crash. * **Divergent Expert Opinions:** While some fear a repeat of the dot-com bust, others, like Barry Schwartz, President and Chief Investment Officer at Baskin Wealth Management, argue that today's leading tech companies are fundamentally different due to their profitability and existing global customer bases. * **AI Development Landscape:** David Sacks, U.S. President Donald Trump's AI czar, suggests that fears of a rapid AI "take-off" leading to one dominant model are unfounded, as leading AI models are showing similar performance benchmarks and continuous improvement. * **Trade War Impact:** The real economy is facing challenges from trade wars and tariffs, with companies like GM and Ford experiencing profit drops. Tech companies are also not immune, with Apple anticipating $2 billion in tariff-related costs. --- ### Key Statistics and Metrics * **Dot-Com Bubble Period:** From 1995 to March 2000, the NASDAQ index climbed **80%**. * **Dot-Com Bubble Burst Impact:** By October 2002, the NASDAQ had dropped a staggering **78%** from its peak. * **Nvidia's Growth:** Since 2022, Nvidia's revenues have **quintrupled**, and its profits have increased **more than tenfold**. * **Apple's Tariff Costs:** Apple expects tariff-related costs to climb to **$2 billion** through the first half of the current year. * **GM's Tariff Impact:** Tariffs led to a **$1.1 billion** drop in profits for GM. --- ### Notable Trends and Changes * **Dominance of Tech Giants:** A few major tech companies are disproportionately driving market gains. * **Aggressive AI Integration:** Companies like Apple, Amazon, and Meta are actively incorporating AI into their business models. * **Insatiable Demand for AI Hardware:** Chipmakers like Nvidia are struggling to meet the high demand for their products from AI-focused companies. * **Investor FOMO:** Despite economic headwinds, there is a palpable sense of "fear of missing out" (FOMO) driving investment in AI-related stocks. --- ### Significant Risks and Concerns * **Overvaluation:** A primary concern is that AI-related stocks are significantly overvalued, mirroring the conditions of the dot-com bubble. * **Unproven Use Cases:** Investors are flocking to AI before the practical applications and underlying technology's use cases are fully established. * **Economic Headwinds:** Trade wars, tariffs, and slowing job growth are creating uncertainty in the broader economy, which could impact even the tech sector. * **Potential for a Severe Market Correction:** If the AI hype does not translate into sustained profitability, a significant market downturn is a distinct possibility. --- ### Important Recommendations (Implied) While no explicit recommendations are made, the analysis implicitly suggests investors should: * **Exercise Caution:** Be aware of the historical parallels with the dot-com bubble and the risks of overvaluation. * **Focus on Fundamentals:** Consider the profitability and established business models of companies, rather than solely relying on hype. * **Monitor Economic Conditions:** Keep an eye on the impact of trade policies and broader economic trends on market performance. * **Assess Long-Term Viability:** Evaluate whether AI investments will lead to sustainable growth and profitability for the companies involved. --- ### Material Financial Data * **Nvidia's Financial Performance:** Quintupled revenues and more than tenfold profit increases since 2022 highlight the company's exceptional growth, largely attributed to its role in AI. * **Automaker Financial Impact:** GM's $1.1 billion profit drop and Ford's first quarterly loss in years due to tariffs demonstrate the tangible financial consequences of trade disputes. * **Apple's Projected Costs:** The $2 billion in tariff-related costs for Apple indicates the financial strain even large tech companies face from trade policies. --- ### Conclusion The current stock market surge, driven by AI enthusiasm, presents a complex picture. While the technological advancements and potential of AI are undeniable, the rapid ascent of related stocks, coupled with high valuations and broader economic uncertainties, raises concerns about a potential bubble. The debate hinges on whether this AI revolution will be fundamentally different from past technological manias, with the established profitability and customer bases of today's tech giants offering a potential buffer against a repeat of the dot-com crash. However, the immediate threat of trade wars and tariffs adds another layer of risk to the market's trajectory.

ANALYSIS | Stocks are soaring, fuelled by AI investments. Can it last? | CBC News

Read original at CBC →

Business·AnalysisIs the stock market in an AI bubble?The stock market is running hot, driven by AI exuberance. Meta, Amazon, Google, Nvidia are driving the record gains on the promise AI will bring big changes to businesses. But right now, many of the players are investing more in AI than they are making.

So will we see a repeat of the dot-com bubble burst or will the hype pay off?Some experts say the stock market today is eerily similar to the market before the dot-com bubble burstStock trader Peter Tuchman, known as the 'Einstein of Wall Street,' works on the floor of the New York Stock Exchange (NYSE) at the opening bell in New York City Monday.

Recent surges, led by tech companies, have some questioning whether AI is creating another bubble. (AFP via Getty Images)Stock markets surged again this week, reaching new all-time highs. Yet again, gains in financial markets were driven by a handful of companies focused on artificial intelligence.

Tech giants like Meta and Nvidia have seen their values soar while investors wait breathlessly for OpenAI, Anthropic and Perplexity to go public.But for all the enthusiasm, some investors are worried. They say we've been down this road before. And they're pointing to the dot-com bubble in the 1990s, when tech companies skyrocketed in value, only to see the bubble burst in early 2000."

The difference between the IT bubble in the 1990s and the AI bubble today is that the Top 10 companies in the S&P 500 today are more overvalued than they were in the 1990s," wrote Torsten Sløk, chief economist at the economics research firm Apollo in a note on his website, citing the price-to-earnings ratios of the companies, a common measure of whether a company's stock may be overvalued.

In other words, he says, this time the bursting bubble could be even worse that it was. And that's saying something.The dot-com bubble in the 1990s had many similarities to the market today. A new technology was offering a potential game-changing way of doing business, and everyone wanted a piece of it.

Facebook CEO Mark Zuckerberg speaks about Meta's augmented reality glasses at Meta Connect in September 2024. The Meta AI artificial intelligence assistant can now make conversation with users, on some apps or connected glasses from the American group, which dreams of taking the lead in the AI companion race.

(AFP via Getty Images)When the bubble burstMany of today's biggest companies were founded in those nascent days of the internet. Companies like Apple, Amazon and Microsoft were key pillars to the then-new wave of technology companies.But other giants of the day failed and were wiped out when the bubble burst.

Companies like Pets.com, Boo.com and WorldCom raised hundreds of millions of dollars and collapsed.From 1995 to March of 2000, the NASDAQ index had climbed 80 per cent. Then the bubble burst. By October of 2002, the NASDAQ had dropped by a staggering 78 per cent from its peak, wiping out all the gains it made during the bubble.

Today, it's not hard to find similarities in the markets. Investors are flocking into a space they don't fully understand, before the use-case application of the underlying technology is established.The real economy is struggling to find its footing amid all the turmoil and uncertainty associated with Trump's trade war and on-again, off-again tariffs.

Job growth has slowed and the U.S. economy shrank in the first three months of the year. Some of America's biggest companies have been clobbered by tariff costs. GM says tariffs led to a $1.1-billion drop in profits. Ford posted its first quarterly loss in years. And still, stocks are at all-time highs and there is a clear sense of FOMO (fear of missing out).

Canadian companies racing to build sovereign, energy efficient data centresSign up for Peter Armstrong's weekly newsletter here"Every bubble in modern market history has been based on a narrative, whether it be the internet or real estate," wrote Wall Street trader Tom Essaye in his newsletter Sevens Report."

Today, that potentially bubble-inflating theme is unquestionably AI technology."What looks different this timeBut for all the similarities, there are some very obvious differences as well.Barry Schwartz joined the investment firm Baskin Wealth Management as the dot-com bubble was bursting. Today, he's the company's president and chief investment officer"Unlike the dot-com pre-revenue companies, these companies are profitable.

They have global distribution, captive customers," he said in an interview with CBC News.Schwartz says Google, Apple, Meta and Amazon all have billions of customers. He says those businesses will continue whether AI becomes a game-changer or not. But if it does, those tech giants will be poised to take advantage."

So this is not like chicken and the egg. The egg and the chicken are already on the table. The market understands it," said Schwartz.Front BurnerInside OpenAI’s zealous pursuit of AI dominanceU.S. President Donald Trump's AI czar, billionaire David Sacks, says most people don't fully understand where AI development really is at the moment."

The Doomer narratives were wrong," he posted to the social media platform X.Sacks says that narrative was built on the notion that there would be a rapid take-off to artificial general intelligence that would propel one AI model to self-improve rapidly enough to leave the others in the dust.But he says the opposite is happening."

The leading models are clustering around similar performance benchmarks," he wrote in his lengthy post last week. "Model companies continue to leapfrog each other with their latest versions."More to the point, those models (like OpenAI's ChatGPT, X's Grok or Google's Gemini) are building what he calls "developing areas of competitive advantage."

WATCH | AI 'assistants' could change how you use the internet AI agents could change how you use the internet OpenAI and other big tech companies are starting to roll out the next wave of artificial intelligence, designed to operate with more autonomy. CBC’s Nora Young breaks down how agentic AI works and why some think it will change how you use the internet.

So, from a market perspective, a handful of AI models are in healthy competition with one another. Meanwhile, the tech giants (Apple, Amazon, Meta just to name a few) are aggressively adapting AI into their business models.And chip makers like Nvidia can barely keep up with the insatiable demand all those companies have developed.

Chipmaker Nvidia is worth nearly as much as the entire Canadian economy. Here's whyWhat is DeepSeek? The Chinese OpenAI rival sparking chaos in tech marketsCase in point, Nvidia hasn't just seen its stock take off. Its revenues are so big they're hard to wrap your head around. Since 2022, Nvidia's revenues have quintupled.

Its profits are up more than tenfold.Tariff uncertainty — even for techThe fears of a repeat of the dot-com bubble may be legitimate.But for now, the more pressing threat is that financial markets start pricing in the impact of the global trade war. Multiple company earnings reports have shown just how deep tariffs are already biting.

Automakers like GM and Ford led the charge, but the tech companies aren't immune. Apple says tariff-related costs will climb to $2 billion through the first half of this year.Schwartz says he knows just how dangerous it is to think that "this time is different." But he says the issue boils down to a pretty simple calculation."

It just comes down to one simple question. Do you think we're gonna be using more AI and data in the future or less?" he said.And clearly, a quick look at markets will show you most investors are betting the answer is more.ABOUT THE AUTHORPeter Armstrong is a senior business reporter for CBC News. A former host of On the Money and World Report on CBC Radio, he was previously a foreign correspondent and parliamentary reporter for CBC.

Subscribe to Peter's newsletter here: cbc.ca/mindyourbusiness Twitter: @armstrongcbc

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