Surging AI investment similar to dot-com boom of late 1990s: IMF

“But the risk is also that lofty profit expectations will ultimately be unmet – as often happens when new general-purpose technologies are introduced. A significant market repricing…could impact aggregate wealth and consumption and spill over to broader financial markets,” it added.

The dot-com boom of the late 1990s saw a huge jump in valuations of US technology companies. However, a bust followed in 2000-2002, resulting in many companies being wiped out. In recent years, investment in AI companies has ballooned and been to the tune of tens and hundreds of billions of dollars, sparking concerns that too much money is being funnelled into the sector and that the results may not match the investments.

On Tuesday, Google said it will invest $15 billion over five years to set up an AI data centre in Andhra Pradesh. This is the US tech giant’s biggest-ever investment in India. Globally, as per Stanford University’s 2025 AI Index Report, private investment in AI in just 2024 rose to $109.1 billion in the US, $9.3 billion in China, and $4.5 billion in the UK. Since 2013, the total private AI investment has been $470.9 billion in the US, $119.3 billion in China, and $28.2 billion in the UK. India ranked seventh with $11.3 billion of private investment in AI from 2013 to 2024, as per the Stanford report released earlier this year in April.

Economists have also noted that the ongoing AI investment boom has also propped up the US economy, which has defied expectations and grew 3.8 per cent year-on-year in the second quarter of 2025. A similar growth rate is expected in the third quarter that ended in September.

In its report, the IMF cautioned on Tuesday that an “abrupt repricing” of technology companies’ stocks could be caused by weaker-than-expected financial results and AI productivity gains. This would mark an end to the AI investment boom and the “associated exuberance of financial markets, with the possibility of broader implications for macro-financial stability” – a correction “could erode household wealth and dampen consumption”.

Earlier this month, employees of OpenAI – founded in 2015 and at the forefront of AI developments with its popular ChatGPT – sold shares in the start-up that valued it at $500 billion, making it the world’s most valuable private company. Anthropic, founded in 2021, is valued at $183 billion. Anthropic co-founder Dario Amodei met Prime Minister Narendra Modi on Saturday.

The world’s most valuable company is NVIDIA, which makes the Graphics Processing Units – or GPUs – that have fuelled the global AI race. NVIDIA, which is worth around $4.5 trillion, last month announced that it would invest $100 billion in OpenAI. Earlier this year in January, several US tech companies joined together to launch The Stargate Project, under which $500 billion would be invested over four years to build new AI infrastructure for OpenAI in the US.

To put these numbers into perspective, India’s most valuable company, Reliance Industries, has a market capitalisation of just over $200 billion.