The AI bubble is about to burst and a big market correction is coming

On Jan.1, 2000, the world got a reprieve from a much-hyped technological Armageddon when it turned out the Y2K crisis wasn’t a crisis after all.Still, a real threat was looming if anyone paid attention to the stock market. A new and life-changing business known as the internet, you will recall, was going to make us all rich, and not just the oligarchs behind the technology.

Dot-com stocks — even those of companies that weren’t making money, and that means most of them — were also supposed to defy common sense and gravity. We were in a “new paradigm” — the code word for the era’s irrational exuberance in which emotion rather than metrics pushed stock valuations.At the time, few people heeded warnings that not every business with that “new economy” suffix was destined for greatness.

It didn’t matter to masses of new investors who flooded the markets armed with the opinions of financial TV touts and newly invented discount brokerages as they kept buying with clicks on a computer screen.People with no real knowledge of Wall Street suddenly rivaled Warren Buffett for their acumen picking these no-lose stocks.It was all the rage in financial media at the time, overwhelming the occasional Cassandras who just didn’t get it. That is, until reality set in.

In March of that year, the historic stock run-up was exposed as one of history’s great investment bubbles.Many of the business models of the companies in the middle of the frenzy and the subsequent collapse were outright insane; most just overvalued by the market.A precious few held real and tangible promise, but they too needed to survive the correction. The losses were staggering.

A generation of investors were burned.The tech market took years to recover from the fallout. History, I’m afraid to say, does repeat itself when it comes to market manias.

That’s why our current mania involving all things AI will almost certainly follow the same trajectory with investor losses to follow.�...