Economist Paul Krugman argues that the current surge in AI-related investment and stock prices bears a troubling resemblance to the late-1990s dot-com bubble, especially in how markets jerk in response to anticipated actions by Federal Reserve officials. He warns that the recent rallies — driven largely by hopes of interest-rate cuts — look more like “dead-cat bounces” than sustainable growth.
Krugman cautions that, even in the dot-com era, Fed rate cuts failed to prevent the collapse of inflated tech valuations — so relying on the Fed to bail out an AI-driven bubble now may be misguided. He suggests that what looks like a tech-fueled boom may hide deeper economic instability, especially when broader trade, manufacturing, and macroeconomic headwinds are also at play.
