ANALYSIS

Authors: Peter Armstrong

Publisher:

CBC

Published: 8/14/2025

Language:English

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Aura Windfall

Good morning norristong_x, I'm Aura Windfall, and this is Goose Pod, just for you. Today is Saturday, August 23rd. It’s a beautiful morning, and we have a topic that’s buzzing with energy and a little bit of tension. What I know for sure is, we need to talk about it.

Mask

I'm Mask. We're here to dissect the AI stock market boom. The topic: ANALYSIS | Stocks are soaring, fuelled by AI investments. Can it last? Forget the tension, the only question is if you're on the rocket ship or watching it leave.

Aura Windfall

Let's get started. There's a powerful narrative of fear circulating, comparing this AI excitement to past bubbles. Erik Gordon at the University of Michigan called it an "order-of-magnitude overvaluation bubble." That kind of language really seeks to inspire a sense of dread, doesn't it?

Mask

Dread for the unprepared. Gordon's right to be loud. He's not just whispering about a repeat of the dot-com crash; he’s shouting that this one will be bigger. He says startups like CoreWeave could make the losses from Pets.com look like pocket change. It’s a necessary warning.

Aura Windfall

And what is the truth behind that warning? Is it just about numbers, or is it about the human tendency to get swept up in a frenzy? I see a parallel in the emotional energy. People are afraid of missing out, and that fear can cloud judgment.

Mask

Let's stick to the facts. Bank of America’s Michael Hartnett points out that the S&P 500's price-to-book ratio is at 5.3. At the absolute peak of the dot-com bubble, it was 5.1. That's not emotion, that's a metric screaming that we're in uncharted territory. "It better be different this time," he says.

Aura Windfall

"Uncharted territory" is a place of both great risk and incredible opportunity. It forces us to ask deeper questions about what value truly is. Is a company's worth just its assets, or is it its potential to change the world? The spirit of innovation is powerful.

Mask

Innovation doesn't pay the bills, revenue does. That's the shift we're seeing. The market is moving from "AI potential" to "AI proof." Look at the second quarter of 2025, the Nasdaq shot up 17%. But the real winners were the ones with tangible results, not just a good story.

Aura Windfall

I find that so inspiring! It’s about authenticity. Companies are being rewarded for showing their true, tangible impact. It seems the market is developing a wisdom of its own, learning to distinguish between a fleeting dream and a grounded vision for the future. That’s a beautiful evolution.

Mask

It's not wisdom, it's brutal efficiency. The semiconductor stocks led the way with a 37% mean return. Why? Because they're building the foundation. They have platform control and differentiated compute. People are betting on the companies making the shovels in this gold rush, not just the prospectors.

Aura Windfall

So, the "shovels"—the infrastructure—feel more real, more certain right now. It’s a lesson in grounding ourselves. What I know for sure is that to build something magnificent, you must first have a rock-solid foundation. It’s true in life and, it seems, in the markets.

Mask

Exactly. While application-layer companies like Palantir and Snowflake are getting traction, the real money is flowing into the core components. This isn't a bubble of ideas; it's a boom in building capacity. The potential is just a byproduct of that build-out. The scale is immense.

Aura Windfall

To truly understand this moment, we have to look back at the lessons from the past. The dot-com bubble of the 1990s feels like a ghost story told to today's investors. A time of incredible dreams, but also a rude awakening. What was the core human emotion driving that?

Mask

It was pure, unadulterated speculation. The "new economy" was the narrative. The Internet was this novel force, and any company with a ".com" in its name was suddenly worth billions, often with no revenue. It was a mass delusion built on the idea that traditional business metrics no longer applied.

Aura Windfall

A delusion of limitless possibility, perhaps? People wanted to believe they were part of a revolution that would change everything. I can empathize with that feeling of being on the cusp of a new world. It’s a powerful, unifying story that people can pour their hopes into.

Mask

It was a fantasy. The NASDAQ Composite index tells the whole story. It went from around 750 in the early 90s to over 5,000 by March 2000. People weren't investing in businesses; they were gambling on momentum. And the house always wins when the bubble bursts. It was a feeding frenzy.

Aura Windfall

And when it burst... the silence must have been deafening. The financial loss is one thing, but what about the loss of faith? The shattered dreams of people who truly believed in that new world? That has a profound, spiritual impact that echoes for years. It creates a collective trauma.

Mask

The NASDAQ plunged 78% by October 2002. It didn't just wipe out gains; it wiped out companies. It triggered a U.S. recession. Even the giants of the time, the "blue-chip" tech stocks like Cisco, Intel, and Oracle, lost over 80% of their value. They were fundamentally good companies, but they were caught in the inferno.

Aura Windfall

It’s a powerful reminder that we are all connected. No company, no matter how strong, is an island. The entire ecosystem felt that collapse. It took 15 years for the NASDAQ to climb back to its peak. Fifteen years to heal that wound. What is the lesson in that for us today?

Mask

The lesson is that fundamentals eventually matter. You can't run on hype forever. Many dot-coms were worthless because they had no viable business model. The market eventually separates the wheat from the chaff, and it does so with extreme prejudice. That's not a bug, it's a feature.

Aura Windfall

I see it as a painful but necessary course correction toward authenticity. The companies that survived, like Amazon, were the ones that had a true purpose beyond just the hype. They had a vision for providing real value. The crisis forced them to prove their resilience and their spirit.

Mask

Resilience is one word for it. They survived because they were ruthless and adaptable. Let's not romanticize it. While the dot-com bubble was massive, other countries have had their own reckonings. Japan's asset bubble in the late 80s led to a "Lost Decade" of stagnation. Economic gravity is universal.

Aura Windfall

And what I know for sure is that these stories, these "Lost Decades" and burst bubbles, are not just economic charts. They are decades of human lives, of people's careers, savings, and futures. We have a responsibility to learn from that history with compassion and gratitude for the lessons.

Aura Windfall

And yet, despite that history, there's a strong voice of optimism today. Viktor Shvets at Bloomberg suggests investors shouldn't worry too much about an AI bubble. How can we hold both the fear from the past and this bold optimism for the future at the same time?

Mask

Because it's not the same game. The argument is that AI isn't just a new sales channel like the early internet was. It's a fundamental shift in productivity and capability. Shvets is betting on a technological revolution, not just a speculative bubble. It's about transformative power.

Aura Windfall

So the purpose is different? The dot-com boom was about connecting people, but this AI boom is about elevating human potential? That’s a beautiful thought. But even with that noble goal, there are still conflicts and challenges that can shake the market's confidence, right?

Mask

Of course. The market is fragile. Look at what happened when DeepSeek, a Chinese AI firm, emerged. Suddenly, Nvidia and other US tech stocks took a hit. The appearance of a credible competitor introduced a new variable and spooked investors. The throne is never secure. Competition is relentless.

Aura Windfall

That sounds like a classic conflict of ego. The belief that one is invincible, suddenly shattered by a new challenger. It forces a moment of humility. But isn't the bigger, more soulful question about the true impact of AI? Is it actually making us better, more productive?

Mask

That's the trillion-dollar question. Economists are looking past the stock prices. The real debate is whether these massive valuations will translate into measurable productivity gains across the economy. Right now, the evidence is, and I quote, "thin on the ground." The hype is writing checks the economy can't cash yet.

Aura Windfall

"Thin on the ground." That phrase has such a feeling of emptiness to it. It suggests a beautiful castle built on a weak foundation. What I know for sure is that true, lasting value has to be rooted in something real. You can't fake a harvest. You have to plant the seeds.

Mask

Exactly. We have trillion-dollar valuations for firms that haven't moved the needle on productivity. This is the core conflict: market perception versus economic reality. The market is betting on a future that hasn't arrived. The longer that gap exists, the more unstable the system becomes. It's a high-wire act.

Aura Windfall

Perhaps the impact isn't a sudden explosion but a slow, gentle unfolding, like a flower. I was reading that the economic impact of AI might follow an "S-curve." A slow start, as we learn and adapt, followed by a rapid acceleration. That feels so organic and truthful.

Mask

An S-curve is a standard adoption model. The slow start is due to massive costs. Alphabet, Meta, and Microsoft are spending colossal sums on data centers. Their property and equipment value has tripled as a percentage of their equity in a decade. That's the barrier to entry.

Aura Windfall

And that investment, that leap of faith, is already having a ripple effect. One analyst estimated that this spending boom was responsible for a third of America's economic growth last quarter. That's a tangible impact right now, a testament to the power of believing in a vision.

Mask

It's a huge bet. The combined capital expenditure of the tech giants is more than all other listed American industrial companies combined. They're essentially building a new utility. The potential payoff is reversing the productivity slowdown that's plagued the U.S. since the 90s. Goldman Sachs projects a 1.5% annual productivity increase.

Aura Windfall

And we are already seeing the first fruits of this. The Federal Reserve found that workers using generative AI were 33% more productive per hour. That’s not just a number, that's people getting back time, reducing stress, and finding more space for creativity and purpose in their work.

Mask

It's about competitive advantage. Companies leading in AI adoption are already seeing 50% higher revenue growth and 60% greater shareholder returns. This isn't about feeling good; it's about winning. The impact is a widening gap between the leaders and the laggards. It's evolution in real-time.

Aura Windfall

Looking toward the horizon, the sense of possibility is just breathtaking. There's a forecast that the generative AI market could explode from $40 billion in 2022 to $1.3 trillion over the next decade. That's not just growth, that's a transformation of our world. It fills me with hope.

Mask

It's a land grab. The growth will come from training infrastructure first, then inference devices and specialized software. But this explosive growth has a cost. The energy consumption is staggering. Data centers could consume 4% of global electricity by 2030, largely because of AI. Every revolution has a price.

Aura Windfall

That is a crucial point. We must walk into this future with our eyes open, ensuring our technological progress is in harmony with our planet. The future isn't just about what we can create, but also about what we have a responsibility to protect. It's a sacred trust.

Mask

And the applications are expanding into core areas of human life. The AI in Genomics market is projected to grow at over 40% annually. We're talking about revolutionizing drug discovery and personalized medicine. The potential to solve humanity's biggest challenges is real, but the path will be disruptive and ruthlessly competitive.

Aura Windfall

What I know for sure is that this conversation is about more than just stocks; it's about our collective future. We're balancing on a beam between a past lesson and a future promise. It's a moment that asks for both courage and wisdom. It has been a joy to explore it with you.

Mask

That's the end of today's discussion. The AI boom is either a bubble or a revolution. The stakes are clear. 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

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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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