What’s Coming After the AI Bubble Pops

Editor's note: In many ways, the AI revolution is nothing new. According to Joel Litman from our corporate affiliate Altimetry, that's because it's following the same pattern as previous boom-and-bust cycles. In this essay, originally published in the free Altimetry Daily Authority e-letter, Joel explains how to prepare your money now... before the AI euphoria winds down.

AI is following the same dangerous pattern we've seen before...

From the steam engine to semiconductors, almost every tech revolution has followed a similar arc.

First comes the "installation phase." This is where massive investment floods into a new technology. Investors are giddy. They throw their cash at everything having to do with the latest tech. There's euphoria, overconfidence, and lots of speculative capital.

But most of these early bets are based on hype, not utility. And in the end, the market always crashes.

We saw this during the dot-com boom. In 1999, Internet stocks were minting millionaires.

The tech-heavy Nasdaq Composite Index doubled in a year as investors poured billions into anything with a ".com" in the name. Just months later, most of those companies were wiped out. More than $5 trillion in market value vanished.

A telecom company called Global Crossing climbed to a $47 billion valuation by 2000... then went bankrupt less than two years later.

Another called Chemdex.com reached a $7 billion valuation... but never booked more than $3.5 million in annual revenue.

The dot-com crash wasn't the end of the Internet... It was just the end of the mania. Thousands of so-called Internet companies went bust. But instead of dying, the Internet entered the next stage... deployment.

It matured. And the winners – companies like Amazon (AMZN) and Cisco Systems (CSCO) – emerged stronger than ever.

Today, we're seeing the same signs with the next hot thing... AI.

Don't Fall for the AI Hype

Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), and Amazon are expected to spend a combined $750 billion on AI infrastructure between this year and next.

By 2029, total global AI spending could hit $3 trillion. That makes it one of the fastest capital build-outs in tech history.

Yet, a recent Massachusetts Institute of Technology survey of more than 300 initiatives found that 95% of companies haven't seen a return from their AI investments. Most are still testing pilot programs... or building tools they don't yet know how to use.

Meanwhile, the biggest winners are already separating themselves from the pack. OpenAI's ChatGPT serves more than 700 million users each week. Nvidia's (NVDA) chips are sold out for months.

And companies like Nebius (NBIS) and Oracle (ORCL) announced record orders for AI infrastructure – ramping up their backlogs and sending their stocks soaring 54% and 43%, respectively, the following day.

These aren't speculative plays. They're becoming essential infrastructure... just like broadband and cloud computing before them.

And when the dust settles, these are the types of companies you'll want to be holding.

What Happens After the Crash

History shows us exactly how these stories end. Overinvestment triggers a crash. Weak companies fold. Capital flees the space. And the survivors take everything.

By 2004, Amazon's stock had recovered and gained more than 500%. Cisco became the backbone of global Internet traffic. Google had just gone public and changed the world of information forever.

We're headed for the same crossroads with AI.

The hype cycle will eventually pop. Companies with no business model will disappear. But those with scale, infrastructure, and proven demand will come out on top.

The key for investors is to stay in the market... and own the companies that already have their foot on the gas. At the end of the day, those leaders won't just survive... they'll dominate.

That's how wealth gets built during tech revolutions. Not by chasing the hype... but by holding the winners.

Regards,

Joel Litman

Editor's note: According to Joel, we're fast approaching a critical moment. He says what's coming could be the single greatest moneymaking anomaly in the U.S. stock market today. That's why tonight at 8 p.m. Eastern time, Joel is sharing the full, never-before-shared details in an exclusive briefing. You don't want to miss the opportunity to learn how you can potentially double your money or more on multiple stocks – before the dominoes begin to fall.