35. The Great Stock Divergence: Why Prices Aren’t Matching Reality

This looks a lot like the Dot-com bubble. Stock prices are hitting record highs, but their valuations are starting to diverge from reality. Americans are scared they’ll miss out on the rise of AI, so they’re pouring cash into the market in record amounts. Meanwhile, price-to-earnings ratios are inching nearer to Dot-com bubble levels. 

 

How close are we to the AI bubble bursting? Is this just another mania, or will AI deliver such strong production and profit increases that this type of stock market becomes the new reality? 90% of investors think the stock market is overpriced…so why is everyone still buying?

 

I’m sharing my thoughts in today’s episode as we compare the Dot-com bubble in 2000 to the 2025 stock market, which is seeing unprecedented price growth thanks to AI. I’ll admit this isn't the same economic environment as the Dot-com bubble, but the similarities are getting hard to ignore. 

 

Stocks could pull back, as they often do after a massive run-up. The question is: will the AI bubble burst, or is this the new reality?

 

Insights from today’s episode: 

 

• The stock market’s “divergence” from reality and why valuations are growing much faster than profits 
• The 2000 Dot-com bubble vs. the AI craze of 2024 and 2025 
• Bubble indicators that are flashing major warning signs, but nobody is paying attention 
• The almost unbelievable size of US stock valuations, dwarfing other major countries
• Can this really last if AI provides the performance gains investors are looking for?

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AJ Osborne Podcast 29. How AI Could Trigger the Next Great Depression 

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