INVESTORS HAVE a habit of getting carried away when new technologies arrive. Over the past 200 years breakthroughs have often led to stockmarket bubbles—and a subsequent correction.
One of the most dramatic was the “dotcom” crash at the turn of the millennium. Plenty of bank bosses and analysts now worry that today’s mania over artificial intelligence (AI) could meet a similarly dramatic end.
Throughout the 1990s investors bid up the price of stocks such as Cisco, Yahoo! and even Pets.com, betting that the rollout of the internet would make these companies highly profitable.
Since then tech firms, and the broader market, have continued to soar. In October Nvidia, a chipmaker, became the first company to reach a valuation of $5trn. According to media reports, OpenAI, the maker of ChatGPT, is laying the groundwork for an eventual stockmarket listing that could value the company at $1trn.
A crash today would have a bigger effect on ordinary Americans than the dotcom bust. Investing has become much easier over the past two decades, and the share of household wealth in the stockmarket has climbed.
About $42trn, or 21% of Americans’ total wealth is in American stocks—an increase of four percentage points since the dotcom era. By comparison, foreign investors hold $18trn-worth of American shares.
Economists usually expect falls in the stockmarket to lead to reduced spending elsewhere. A rule of thumb suggested by one study is that every $100 drop in stockmarket wealth leads, on average, to a $3.20 drop in consumer spending. Under such an assumption, a dotcom-style crash would cut American consumption by about $500bn, or 1.6% of GDP.
One reason investors fear an AI crash is how strongly America’s biggest firms, and its markets, are tied to the technology. In 2000 the 20 biggest firms on the S&P 500 made up 39% of its total value. Eleven of those were internet-related companies. Today the top 20 account for 52%, with the same number deeply invested in AI. If the tech fails to deliver juicy returns they would all be hit hard, along with a large number of Americans.■
Correction (November 12 2025): An earlier version of this story stated that, under certain assumptions, a dotcom-style crash could cut American consumption by about $890bn, or 2.9% of GDP. The correct figure is $500bn, or 1.6%. It also stated that 20% of Americans’ total wealth is in American stocks; it is actually 21%. Sorry.
Sources:
BEA; Bloomberg; LSEG Workspace; Federal Reserve