The International Monetary Fund (IMF) has warned that the surge in technology stocks driven by artificial intelligence (AI) could prove more dangerous than the dotcom bubble of the early 2000s.
In its latest Global Financial Stability Report, the IMF cautioned that asset prices are at risk of collapse if soaring investor expectations are not met.
“The possibility of mega-cap stocks failing to generate expected returns to justify current lofty equity valuations could trigger deterioration in investor sentiment and make the stocks susceptible to sudden, sharp correction,” the watchdog said. “Valuations would collapse as a result, making the broader benchmark index vulnerable to downturns.”
The IMF highlighted that market concentration risk—where a small number of large companies dominate indices—is now “substantially higher than during the dotcom bubble,” raising fears that a correction in a handful of AI-driven stocks could reverberate across global markets.
The late-1990s tech boom saw investors pile into internet companies with unproven business models, leading to a spectacular crash that wiped out billions in market value and hundreds of startups. The IMF drew parallels with today’s AI enthusiasm, warning that investors may be repeating similar mistakes.
“Despite trade tensions, geopolitical uncertainties, and rising concerns about sovereign indebtedness, asset prices have returned to stretched valuations and financial conditions have broadly eased,” the Fund said. “Markets appear complacent as the ground shifts.”
The warning comes as the soaring valuations of AI leaders such as Nvidia, Microsoft and Alphabet have driven major indices to record highs this year, fuelling debate over whether the AI revolution represents a transformative shift—or another speculative bubble in the making.
