Top Economist Warns AI Hype Mirrors 1990s Dot-Com Bubble

According to Jin10, Nobel Prize-winning economist Paul Krugman has drawn a sharp comparison between the current AI investment boom and the final years of the 1990s internet bubble, warning investors may be misreading recent signals from the Federal Reserve. Krugman described the 2025 U.S. economy as 'schizophrenic,' shaped by conflicting forces: Trump’s abrupt reversal of 90 years of trade policy and a surge in AI-related investments. He warned that the AI-driven rally resembles the late 1990s tech boom, which led to a prolonged decline rather than a sudden crash. Krugman noted that AI stocks react strongly to Fed signals, despite these reactions being 'nonsensical.' The Bloomberg 'Magnificent Seven' index, previously down due to AI bubble concerns, surged after market participants interpreted Fed comments as signaling higher chances of rate cuts. Krugman recalled the 1990s 'dead cat bounce' pattern, where brief rebounds failed to prevent a long-term collapse. He warned that this time, the Fed may not offer a similar rescue. Meanwhile, U.S. Treasury Secretary Bezant and Cathie Wood of ARK Invest dismissed bubble fears, with Wood claiming the AI story is just beginning. Ruchir Sharma, former head of Rockefeller International, warned of structural vulnerabilities in the U.S. economy's overreliance on the AI narrative.