The A.I. Race and the Specter of the Dot-Com Boom: ‘We’ve Heard This Story Before’

Investors are pouring billions into artificial intelligence. Historians and economists are asking whether the euphoria will end differently than the last great technology bubble.

Traders on the floor of the New York Stock Exchange, where A.I.-linked stocks have surged more than 300 percent since 2023. Spencer Platt/Getty Images

SAN FRANCISCO - In 1999, a company called Pets.com raised $82.5 million in an initial public offering, burned through most of it in nine months and collapsed in what became one of the most vivid symbols of the dot-com bust. Today, venture capitalists are betting similar sums on A.I. startups that have yet to turn a profit - and some on Wall Street are beginning to ask uncomfortable questions.

The numbers are staggering. More than $200 billion flowed into artificial intelligence investments last year alone, according to data from PitchBook, dwarfing the peak capital deployed during the late 1990s technology boom even after adjusting for inflation. Nvidia, whose chips power most large language models, briefly became the world’s most valuable company, with a market capitalization exceeding $3 trillion.

The comparison to the dot-com era is not universally accepted. Proponents of A.I. argue that today’s companies have genuine revenue, real customers and transformative technology - unlike the speculative ventures of 1999. OpenAI is on track to generate more than $4 billion in annualized revenue. Microsoft has embedded A.I. across its product suite. Google’s Gemini is used by hundreds of millions of people.

But skeptics point to patterns that feel familiar. Valuations have become untethered from earnings. Executives at even pre-revenue startups speak of “inevitable” dominance. And the word “transformative” - a staple of 1990s prospectuses - appears in nearly every A.I. pitch deck.

“Every bubble has a kernel of truth,” said Bradford DeLong, an economic historian at the University of California, Berkeley. “The internet really did transform the world. But that didn’t mean Pets.com was worth anything. The same logic applies here. The technology may be real. The valuations may still be fantasy.”

What happens next, economists say, depends partly on whether A.I. can actually deliver the productivity gains that justify the investment. Early signs are mixed. Some industries - law, software development, customer service - are already seeing measurable efficiency gains. Others have found that the technology introduces as many complications as it solves.

Tech Giants Post Record Earnings as A.I. Revenue Surges Past Wall Street Forecasts

Microsoft, Alphabet and Meta reported their strongest quarters in years, driven almost entirely by artificial intelligence products and cloud infrastructure spending.

Microsoft’s Azure A.I. division accounted for nearly 40 percent of the company’s cloud revenue in the first quarter of 2025. Microsoft Corp.

SAN FRANCISCO - The five largest technology companies in the United States posted a combined $95 billion in quarterly profit on Tuesday, shattering analyst expectations and confirming that artificial intelligence has become the defining growth engine of the global economy - at least for now.

Microsoft reported revenue of $71.2 billion, up 22 percent from a year earlier, fueled almost entirely by its Azure cloud platform and its Copilot suite of A.I. tools now embedded in Office, Teams and Windows. The company added that it would spend $80 billion on data center infrastructure this year, nearly double its capital expenditure from 2023.

Alphabet, Google’s parent company, posted earnings of $26.3 billion, up 31 percent, and raised its full-year revenue guidance for the third consecutive quarter. Chief Executive Sundar Pichai told analysts that A.I. Overviews - the A.I.-generated summaries that now appear at the top of Google Search - are used by more than 1.5 billion people each month.

Meta’s results were perhaps the most striking. The company behind Facebook and Instagram reported $17.8 billion in net income, a 47 percent increase, driven by an A.I.-powered advertising system that the company says can now predict with remarkable accuracy which ads users are most likely to click. Chief Executive Mark Zuckerberg called it “the most profitable year in Meta’s history, with more to come.”

The results sent tech stocks surging after hours, with the Nasdaq Composite briefly touching a record high. But some analysts cautioned that the earnings masked a dependence on capital spending that could become problematic if A.I. revenue growth slows. Together, the five tech giants spent more than $200 billion on A.I. infrastructure last year - money that will need to be justified by commensurate returns.

Supreme Court Agrees to Hear First Major Case on A.I.-Generated Art and Copyright

The case, which involves an image-generation company and a coalition of artists, could determine whether works created by artificial intelligence are entitled to copyright protection.

The Supreme Court agreed to hear a case that could reshape the future of copyright law in the age of artificial intelligence. AP Photo/J. Scott Applewhite

WASHINGTON - The Supreme Court agreed on Thursday to hear its first major case involving artificial intelligence and copyright, a dispute that could reshape creative industries and determine who - if anyone - owns the output of image-generation software.

The case, Midjourney v. Artists’ Coalition, centers on whether A.I. companies that train their systems on billions of copyrighted images without permission have engaged in infringement, and whether the images those systems produce are themselves eligible for copyright protection. Lower courts have issued contradictory rulings, creating a patchwork of legal uncertainty.

A coalition of visual artists sued Midjourney, Stability AI and several other companies in 2023, arguing that their work had been used without consent or compensation to train models that now compete directly with human artists. The companies have argued that training on publicly available images constitutes fair use - a legal doctrine that permits certain uses of copyrighted material without permission.

The copyright question is equally thorny. The Copyright Office has maintained that works created solely by A.I. - without sufficient human creative input - are not eligible for copyright protection. But what constitutes “sufficient” human creativity when a person types a prompt that generates an image is deeply contested.

“This case will define the creative economy for the next century,” said Rebecca Tushnet, a copyright law professor at Harvard Law School. “The court has to answer questions that Congress never anticipated when it drafted copyright law, in a world where machines can generate thousands of images a second.”

Fed Holds Rates Steady, Signals Two Cuts Still Possible in 2025 Despite Inflation Uncertainty

Federal Reserve officials left interest rates unchanged for the fourth consecutive meeting, but their updated projections suggested a narrow path to easing before year’s end.

The Marriner S. Eccles Federal Reserve building in Washington. The Fed left its benchmark interest rate unchanged at its June meeting. Federal Reserve/Public Domain

WASHINGTON - Federal Reserve officials voted unanimously on Wednesday to hold their benchmark interest rate steady at 4.25 to 4.5 percent, citing continued uncertainty about the inflation outlook while leaving the door open to rate cuts later in the year if economic conditions allow.

The decision was widely expected after a series of economic reports showing inflation cooling gradually but unevenly. The consumer price index rose 2.6 percent in May compared with a year earlier, down from a peak of 9.1 percent in 2022 but still above the Fed’s 2 percent target. Core inflation, which strips out volatile food and energy prices, remained at 2.8 percent.

In their updated economic projections, known as the Summary of Economic Projections or “dot plot,” Fed officials indicated they expected to cut rates twice before the end of 2025, though with considerably less certainty than they expressed six months ago. The median projection showed the federal funds rate ending the year at 3.75 to 4 percent.

Jerome H. Powell, the Fed chairman, was characteristically cautious at his post-meeting news conference. “We are making good progress,” he said, “but we are not yet at a point where we are confident that inflation is durably on a path back to 2 percent. The economy remains strong. Labor markets remain solid. We have the luxury of time.”

Markets responded with a modest rally. The S&P 500 rose 0.6 percent after the decision, while yields on two-year Treasury notes, which are highly sensitive to Fed policy, fell slightly. Traders in federal funds futures markets slightly increased their bets on two rate cuts this year, pricing in roughly a 60 percent chance of the first cut arriving in September.

Netflix Adds 8 Million Subscribers as Password Crackdown Continues to Reshape Streaming

The company’s aggressive paid-sharing initiative, once feared to anger users, has instead driven its strongest subscriber growth in three years.

Netflix reported its best quarterly subscriber growth since 2021, fueled by its paid password-sharing program and a strong content slate. Netflix/Wikimedia Commons

LOS ANGELES - Netflix reported Tuesday that it added 8.05 million subscribers in the second quarter, far exceeding analyst forecasts and cementing the company’s position as the dominant force in a global streaming market that rivals have struggled to monetize.

The results surprised Wall Street, which had expected Netflix to add roughly 5.5 million subscribers after a strong first quarter. Shares of Netflix jumped more than 11 percent in after-hours trading, adding roughly $25 billion to the company’s market capitalization.

The growth was driven in large part by Netflix’s paid password-sharing initiative, which the company began rolling out globally in mid-2023. The program, which requires users to pay an additional fee of $7.99 a month to share their account outside their household, initially sparked a backlash. But the feared mass cancellations never materialized, and instead, millions of former freeloaders converted to paying customers.

Netflix’s advertising-supported tier, which costs $6.99 a month, also gained significant traction. The company said the ad-supported plan now accounts for 45 percent of all new sign-ups in markets where it is available, up from 30 percent a year ago. Netflix said it expected advertising revenue to double year-over-year in 2025.

Greg Peters, Netflix’s co-chief executive, credited the company’s content slate for sustaining momentum. “When you have great shows, people sign up and they stay,” Mr. Peters said on a call with analysts. “The content machine is firing on all cylinders.” Recent hits have included a new season of “Stranger Things,” a documentary on the 2024 Olympic Games and a live comedy special that drew 28 million concurrent viewers.