Boom Or Bust: Is AI moving towards another Nasdaq Crash?

Posted by Peter Rudin on 23. February 2024 in Essay

GPT-5 to arrive                        Credit:


There are a myriad of AI-risks we deal with in our lives every day. Some of the biggest include the lack of consumer privacy, biased programming, danger to humans and unclear legal regulation. This ‘Bust’ scenario contrasts sharply with the ‘Boom’ caused by  OpenAI’s GPT-5 release. Sam Altman, CEO of OpenAI, calls for strong government regulation because by applying GPT-5 things might go ‘horribly wrong’. To some experts this view represents  an overhyped sales pitch which could possibly signal a new Nasdaq Crash if the financial performance of the tech-sector consistently fails expectations.

Reasons behind the Crash that started in the Year 2000

The dotcom bubble, also known as the internet bubble, was the result of a rapid rise in U.S. equity valuations of technology stocks fuelled by investments in internet-based companies during the late 1990s. During the dotcom bubble, the value of equity markets grew exponentially, with the technology-dominated Nasdaq index rising from under 1,000 to more than 5,000 between the years 1995 and 2000. The crash that followed saw the Nasdaq index fall 77% from a peak of 5,048.62 on March 10, 2000, to 1,139.90 on Oct 4, 2002. By the end of 2001, most dotcom stocks had gone bust. Even the share prices of blue-chip technology stocks like Cisco, Intel and Oracle lost more than 80% of their value. It would take 15 years for the Nasdaq to regain its dotcom peak, which it did on April 23, 2015. The dotcom bubble grew out of a combination of speculative investing, the abundance of venture capital funding for start-ups and the failure of dotcoms to return a profit. Prior to the crash, record amounts of capital had started flowing into the Nasdaq. By 1999, 39% of all venture capital investments were going to internet companies. That year, 295 of the 457 IPOs were related to internet companies. It is estimated that more than USD 50 billion was invested in AI start-ups during the period 2011 through mid-2018.  Current data suggests that start-ups operating in the United States account for most AI start-up equity investments worldwide. Different from the late 1990’s is China’s dramatic upsurge in AI-investments. This growth reflects their efforts to become a global  leader in AI development. On the political front this trend is causing considerable alarm, calling for trading restrictions which in turn might negatively impact the performance of AI-focused companies. Looking back one can conclude that the crash was basically the result of greed and unrealistic profit expectations taking advantage of global Internet connectivity through edutainment, infotainment and e-commerce.

Sam Altman and the threat of losing Control over AI

According to an article published late 2023 by The Independent How Sam Altman Ran Afoul of the Keepers of the AI Faith | The Nation, Altman is a move-fast-and-break-things type of operator, someone who believes in pushing artificial intelligence research quickly and boldly. Like other AI executives, he has stated that the technology could one day lead to a global apocalypse, but despite that risk, more money needs to be spent on AI-research as the benefits outpace the potential danger of a societal collapse. This general attitude is widespread among Silicon Valley investors. The more money is provided to a disruptive project the better the chance that market control is achieved. The only real question is how to manage the potentially seismic threat of a massive planetary disruption that comes with the wholesale adoption of AI and the millions of people who have taken-up hallucinating chatbots as productivity tools. Astute analysts and scholars have pointed out that AI’s immediate threat is not that it surpasses human intelligence, rather these systems replace humans or become our overseers, dictating not only the terms of our labor but also our patterns of material consumption and our politics. This dark eventuality is already emerging with algorithms that determine a prisoners’ parole or in chatbots flooding social networks with biased information. The utopian potential of AI remains hazy and mostly undefined, something that only visionaries like Sam Altman can possibly comprehend. The mandate for his followers is to double check their messianic conviction. The one sure thing to emerge after Sam Altman’s high-managerial chaos is that he will continue to preach his gospel  with the well-funded support of Microsoft.

The Call for Regulation

At the recent World Governments Summit in Dubai, Sam Altman said he feared that things could go ‘horribly wrong’ with AI — even without any ill intent involved. I am not that interested in the killer robots walking down the street of things going wrong as quoted by the Associated Press. I am much more interested in the very subtle societal misalignments of new AI-systems. Echoing a growing sentiment in the tech sector, Altman took the opportunity to call for an international body to regulate AI, comparing such an initiative to what the International Atomic Energy Agency does for nuclear power. To do this right,  the industry should not be left to regulate itself. “I think we are still at a time where debate is needed but at some point in the next few years, I think we have to move towards an action plan”, Altman said. Accompanied with plenty of Media Coverage Altman has been one of the most vocal proponents for change, repeatedly calling on governments to step in with guidelines on AI. It seems inevitable though, that the courts will have as much a say on the industry’s future as any government institution. Copyright qualms remain one of the biggest obstacles to generative AI as artists, authors and even media companies have all fired off lawsuits against big-tech companies, with complaints  about monetizing content without financial return to those providing content. However, Altman remains positive that these issues will eventually be resolved as it is in the public interest to avoid a potential disaster caused by unregulated AI.

Geoffry Hinton’s changing View of Intelligence

Geoffrey Hinton, a luminary in AI’s evolution, has significantly shaped our understanding through his pioneering work on neural networks and backpropagation. This mathematical framework, which underpins the learning process of neural networks also mirrors the synaptic adjustments in the human brain. Hinton’s insights into the comparative density of neural connections – billions in the human brain versus millions in neural networks – underscore an intriguing paradox. Despite the numerical disparity, neural networks exhibit learning capabilities that surpass human performance. This revelation, as articulated by Hinton, marks a pivotal shift in our approach to AI. “I thought if we built computer models of how the brain learns, we would get a better understanding about machine learning. Now I realize that the digital intelligences we are building prove to be better than the brain. That new insight changed my mind after fifty years of thinking that we would make better digital intelligences by matching the functionality of the human brain.” Hinton’s revelation, published in the Modern Scientist in February 2024, disrupts the pursuit of merely replicating human cognition, suggesting that AI’s mathematical intelligence could forge a new kind of intellect, distinct and perhaps even surpassing human capabilities. As we explore AI’s rapid learning capability, we might reach the milestone of a new intelligence paradigm. This evolving form of AI, defined by its algorithmic depth, challenges our traditional views on intelligence and consciousness. As AI and its related technologies continue to fuel its present-day trajectory and impact, one can draw parallels with past innovations that unpredictably reshaped humanity’s path.


As 2023 ended, investors who had remained in the US stock market had reasons to celebrate. Within a  year the S&P 500 had surged 25%, the Dow was up 13% while the tech-heavy Nasdaq had shot up 44%. It took more than two years to finally hit a new all-time high in January 2024, continuing a trend that emerged in 2023 with strong outperformance provided by a narrow group of mostly technology-oriented stocks referred to as ‘The Magnificent Seven’: Amazon, Alphabet (Google), Apple, Meta (Facebook), Microsoft, Nvidia and Tesla. A rapid downturn of their expected financial performance coupled with too much hype and the loss of consumer trust could be the flexing-point of a new Nasdaq Crash, possibly far more disruptive to our economy compared to the previous one. To some market analysts this process has already started.

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