AIMarkets
|4 min ReadGoldman warns AI mania echoes 1999 internet bubble
Jax Morales
Senior Analyst
Published
Jan 16, 2026
Wall Street is cheering AI. Goldman Sachs is waving the flag. Senior adviser Dominic Wilson and macro strategist Vickie Chang told clients on Sunday that today’s AI trade is starting to look like late-1990s tech. Not 1999 yet, they said. But the risk of a repeat is rising. That is the line everybody should underline.
They point to the classic tells. Investment outlays surged to “abnormally high levels” in the 1990s and peaked in 2000, when nonresidential investment in telecom and tech hit about 15% of U.S. GDP. In the months before the bust, capex rolled over. Prices were rich. Real-world spending blinked. That was the turn.
This year, investors are watching the same movie. The Big Five are writing big checks. Amazon, Meta, Microsoft, Alphabet, and Apple are on pace to spend about $349 billion in capital expenditures in 2025, largely to fuel AI. It is bold, it is beautiful, it is also exactly the kind of number that makes old hands nervous.
Profits are the second tell. In the last cycle, profitability topped out around 1997, then faded even as stock prices ripped. Today’s earnings look strong. FactSet shows the S&P 500’s blended net margin at roughly 13.1% for Q3, above the 12.1% five-year average. But Goldman’s history lesson is blunt. In booms, the macro profit downshift tends to start before prices give in.
Debt is the third tell. In the dot-com era, company leverage climbed and the ratio of corporate debt to profits peaked in 2001, right as the bubble broke. We are not there now. Many firms are funding capex with free cash flow, and debt relative to profits sits well below the 2000 top. Still, some giants are tapping markets. Meta sold $30 billion of bonds in late October to power its AI plan. That is serious firepower.
Easier Fed and widening spreads add fuel and stress
Another late-1990s echo is policy. Back then, the Federal Reserve was cutting rates. Cheaper money and global capital inflows juiced stocks. This fall, the Fed trimmed by 25 basis points at its October meeting. Futures show traders expecting another 25 basis points in December. Ray Dalio and others have warned that easier policy can feed bubbles. It is not complicated. Lower rates lift multiples. Liquidity hunts growth. AI is the poster child.
Credit spreads are the fifth signal. Before the dot-com bust, spreads widened as investors demanded more compensation for risk. Today’s spreads remain near historic lows, but they have ticked up in recent weeks. The ICE BofA US High Yield OAS rose to about 3.15% last week, up 39 basis points from the late-October trough of 2.76%. Small moves matter at the margins. They tell you risk appetite is not limitless.
Goldman’s bottom line: risks rise, upside still possible
Goldman’s team says the warning lights flashed at least two years before the 2000 break. The same could happen again. The market is not at 1999. Not yet. But as AI capex stays hot, profits wobble at the edges, debt inches up for select players, the Fed eases, and credit spreads widen, the r
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