Artificial intelligence (AI) has seen tremendous growth in recent years, exploding into popular culture and industry and drawing comparisons to the now infamous dotcom bubble and crash of the 1990s.
During the late 1990s until the early 2000sInternet companies were the subject of massive hype and investment, with the sector peaking at $2.95 trillion before plunging to $1.195 trillion as capital dried up and investors left in droves, causing many companies in the industry to fail.
According to data from the analytics platform Statista, the artificial intelligence market will continue to grow from 2021 at the current market size. estimated will be around $200 billion and is projected to reach $1.8 trillion by 2030.
In an interview with Cointelegraph, Henry Nothhaft Jr., who has worked in the AI field since 2009 in various roles and founded early AI software company Trapit, said that the rapid expansion of AI and the dot-com bubble share some key attributes.
Nothhaft pointed out the scale of the impact on the economy and society in both cases. AI in particular has been a polarizing topic, prompting tech leaders like Elon Musk warn of impending doom while also investing in the industry.
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“Both represent transformative technological innovations that are redefining industries and changing social behavior,” he said.
“Like the dot-com bubble, we’re experiencing a hype cycle in AI characterized by rapid innovation, a frothy investment environment, lots of new entrants and, I think, overblown expectations,” Nothhaft added.
AI is still in its infancy
While Nothhaft thinks it’s too early to tell how inflated expectations are for AI, he believes most AI companies created during the hype will fail and a small number of winners will shape the future of the industry.
Chatbot ChatGPT by OpenAI launched in November 2022 and quickly became one of the fastest growing web platforms in history, surpassing 1 million daily users in just five days and reaching 100 million monthly users by January 2023.
However, it saw a a recent drop in trafficand rivals such as Google’s Bard, Microsoft’s Bing, and Character.ai have yet to achieve the same level of success.
However, according to Nothhaft, AI will not experience a crash on the same scale as the dot-com bubble. Unlike the early years of the Internet, which he believes were more of a period of exploration and innovation than utility, AI has already seen applications in a variety of sectors, including media, healthcare, finance, transportation and education.
“While AI is still in its infancy, these AI applications are not projections of the future – they are here and now. AI is delivering tangible value today,” said Nothhaft.
“It will soon be challenging to distinguish between the AI industry and the broader software industry as AI becomes a pervasive part of the digital landscape,” he added.
AI and cryptocurrencies
The rise of artificial intelligence also has parallels with cryptocurrencies, which have seen their own meteoric rise over the past decade, surpassing a total market cap of $3 trillion at their peak in November 2021, before losing more than half of their value in 2022.
Initial Coin Offerings (ICO) gained huge popularity as a fundraising technique for blockchain initiatives in 2016 to 2017. One of the key advantages was that entrepreneurs could receive funding directly from the crypto community.
Non-Fungible Tokens (NFTs) also experienced a period of massive boom, but Nothhaft said NFTs and ICOs couldn’t be more different from AI.
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According to Nothhaft, NFTs and ICOs represent specialized applications of blockchain technology, while artificial intelligence represents a significant technological innovation with broad, tangible applications.
“Unlike the crypto space, where hype has often exceeded reality, the promise of artificial intelligence is based on substantial technological advances and almost limitless applications,” he said.
“The growth of artificial intelligence may seem rapid, but it is not a bubble like we have seen with certain cryptographic phenomena.”
Sam Huber, CEO of the company the LandVault metaverse platform, shared another insight on Cointelegraph. He believes that NFTs and ICOs share some similarities with the AI market, particularly in terms of initial hype, rapid growth and subsequent potential for market corrections – but they differ in the factors that drive growth.
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According to Huber, the growth of AI is primarily driven technological progress and practical applicationswhile crypto and related assets such as NFTs and ICOs often attract speculative investments motivated by the prospect of quick financial gains.
“AI is a broad field encompassing various technologies and applications, while cryptocurrencies such as bitcoin and ethereum are specific digital assets,” he said.
“The value of AI is its ability to improve and transform various industries, while cryptocurrencies serve primarily as decentralized digital currencies or investment assets,” Huber added.
Differences from the dot-com bubble
Huber said the rapid growth of artificial intelligence and the dot-com bubble have some parallels — specifically, in both cases, not all businesses or investment opportunities in the space have a viable business model.
“A lot of businesses called themselves ‘Internet businesses’ just because they had a website. It’s similar to a lot of companies today calling themselves ‘AI companies’ because they’re joining ChatGPT,” he said.
“These companies attract speculative investment but do not create significant differentiation or defensible technologies. When these companies fail to deliver or raise their next round, it can cause a market crash.”
But Huber says it’s a very different environment than in the 1990s, when companies in the dot-com sector went public much earlier and once they went public, small investors could invest in them.
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“Today, companies are able to raise a lot more capital privately so they don’t have to list,” Huber said.
“If they fail, the impact on the market is much less because they only have institutional investors on the cap charts, so the general public is protected and mass panic is avoided,” he added.
Overall, Huber says one of the main differences between other tech bubbles and AI is that it is driven by specific applications and use cases, with many companies incorporating AI into their operations and products.
The crypto industry is ripe for AI projectsand the music and film industry also started experiment with it.
AI-generated tracks are getting scary good.
The music industry is NOT ready for this.
Here are 9 songs created 100% by AI:
1. Michael Jackson sings “I Feel It Coming” by the Weeknd pic.twitter.com/XiaHDSrXOf
— The AI Solopreneur (@aisolopreneur) April 18, 2023
“This fundamental difference suggests that AI progress is driven by practical utility rather than mere speculation,” Huber said.
AI on a different path than the dot-com bubble
Osman Masud, CEO of independent video game developer The Game Company, which uses AI in its products, told Cointelegraph that AI is unlikely to follow the same path as the dot-com bubble.
“The dot-com bubble was caused by speculation around Internet companies. AI technologies have already proven their practical use in industries such as healthcare, finance and automation,” he said.
“While AI and the dot-com bubble experienced rapid expansion, the difference lies in the level of maturity and the tangible value created,” added Masud.
Related: Apple has its own GPT AI system, but no plans for a public release: Report
Overall, Masud believes that the growth of artificial intelligence is driven by advances in machine learning, deep learning and neural networks that are constantly evolving and improving.
With the potential to transform industries and improve efficiency, he said, the AI industry is expected to continue to see significant growth, not collapse, in the coming years.
“While market fluctuations and corrections may occur, the long-term impact and potential of AI is expected to be significant due to its broad applications and transformative capabilities,” Masud said.