AI Boom Bigger Than 1990s Tech Mania, Warns Apollo Economist

Torsten Sløk says sky-high valuations signal growing risk of a major correction

Artificial Intelligence Craze Reaches Fever Pitch

Torsten Sløk, Chief Economist at Apollo Global Management, has warned that the current artificial intelligence (AI) stock boom may be even more inflated than the infamous dot-com bubble of the 1990s.

Speaking this week, Sløk stated:

“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 are more overvalued than they were in the 1990s.”

Tech Giants Drive Market to Record Highs

The surge in investor appetite for AI has pushed valuations for companies like:

• NVIDIA (now trading above a $4 trillion valuation)
• Microsoft
• Meta

to unprecedented levels. These firms are at the heart of the current rally, as traders pour money into what they see as the next transformative technology.

Top 10 Stocks Heavily Concentrated

Sløk highlights a key concern: the S&P 500's top 10 companies are contributing a disproportionate share of market growth. This valuation concentration, he argues, is even greater than during the dot-com era, raising the risk of a sharp correction.

“Profitable, But Still Overpriced”

Unlike the tech companies of the 1990s, today’s AI giants are highly profitable. However, Sløk cautions that even strong earnings do not justify unlimited price-to-earnings multiples.

While profitability supports investor enthusiasm to some extent, it doesn’t eliminate the risk of overvaluation or market imbalance.

AI Mania Spreads from Silicon Valley to Wall Street

Investor optimism about AI is showing no signs of slowing. From cloud computing to generative AI, demand for cutting-edge applications has fuelled one of the most intense bull runs in modern tech history.

Yet Sløk’s warning introduces a note of caution:

“This isn’t the 1990s — it’s potentially something even bigger. And that means bigger risks too.”

What This Means for Investors

 Potential Upside

• AI adoption is likely to expand across industries
• Core AI companies have strong fundamentals
• Investors could still benefit from carefully chosen AI-related stocks

 Rising Risks

• Valuation multiples are stretched
• Market growth is heavily reliant on a small group of tech firms
• Any shift in sentiment could lead to sharp corrections

Should You Invest in AI Now?

While the long-term outlook for AI remains strong, Sløk’s comments suggest that the market may be running ahead of itself. Investors should consider:

• Diversifying exposure beyond the most hyped stocks
• Monitoring earnings vs. valuation closely
• Preparing for potential volatility as sentiment evolves

Source: (Investing.com)