Amazon founder Jeff Bezos and Goldman Sachs CEO David Solomon are voicing caution about the current frenzy in artificial intelligence (AI) investment, likening the environment to an “industrial bubble.” Both leaders, speaking at the 2025 Italian Tech Week in Turin, warned that while AI will reshape industries far and wide, excessive bullishness among investors is leading to a perilous disregard for risk and a potential correction in equity markets.

AI Stocks Ignite a Market Rally

This year, the U.S. equity markets have surged on the back of enthusiasm for AI and technology. By early October, the Dow Jones Industrial Average was up 10%, the S&P 500 up 14%, and the Nasdaq Composite an impressive 18%. This rally has been driven significantly by major gains in tech giants such as Nvidia, Microsoft, Meta, and Alphabet—companies at the center of AI innovation and deployment.

AI’s breakthrough applications, from generative AI platforms like OpenAI’s ChatGPT to specialized hardware for large-scale training and inference, have enticed both institutional and retail investors to pour capital into the sector at an unprecedented pace. According to data from PitchBook, AI and machine learning startup funding in 2024 reached over $120 billion worldwide, up more than 40% year-over-year.

Bezos: The “Industrial Bubble” in AI

In his remarks, Jeff Bezos characterized the rush into AI investments as an “industrial bubble”—one where early-stage ideas and companies are getting funded regardless of their underlying business fundamentals. Investors have a hard time in the middle of this excitement distinguishing between good ideas and bad ideas, Bezos stated, according to reports from the Financial Times and CNBC. That’s also probably happening today. But it doesn’t mean that anything that’s happening isn’t real. AI is real, it is going to change every industry.

Bezos added that, historically, even bubbles—such as the dotcom bubble two decades ago—ultimately leave behind improved infrastructure and transformative technology. An industrial bubble can still yield meaningfully positive outcomes in the end, after the feverishness tapers off, he said.

Solomon: Expect Market Drawdown

Echoing similar concerns, David Solomon of Goldman Sachs refrained from outright calling the current situation a bubble but noted investor optimism may be blinding markets to fundamental risks. I wouldn’t be surprised if in the next 12 to 24 months, we see a drawdown with respect to equity markets, Solomon told attendees in Turin. There will be a lot of capital that’s deployed that will turn out to not deliver returns, and when that happens, people won’t feel good.

Solomon explained that investors, caught in the wave of optimism, tend to focus on the positives, often neglecting downside risks, warning of the need for a “reset” or market correction. His remarks come as an increasing number of analysts urge caution amid record-high tech valuations comparable to the “irrational exuberance” leading up to the dotcom crash of 2000.

Is This the Dotcom Bubble 2.0?

The current climate has prompted many to compare the AI-fueled rally to the dotcom bubble. However, some argue this time is different. Tech bulls, including Wedbush Securities analyst Dan Ives, assert that underlying AI demand is real and driven by high adoption rates from enterprise and consumers alike. Hardware giants like Nvidia—with its $100 billion investment in OpenAI—are seeing robust growth in sales of the chips and systems powering generative AI models.

We believe this tech bull market lasts another 2-3 years and any worries about a tech bubble are way overdone, Ives wrote in a recent note. Enterprise spending trends are accelerating, not the opposite.

Data from IDC forecasts that global spending on AI systems will top $300 billion by 2026, growing at a compound annual rate of over 27% since 2021. Big tech’s revenue trajectories, such as Microsoft’s Azure AI and Google Cloud’s AI portfolio, support the view that value creation in AI is meaningful and immediate for major players.

Bubble Warnings Amplify as Corporate Debt and Circular Funding Grow

Skeptics point to worrying signs reminiscent of past market bubbles. A recent report from Axios highlights how the scale and sources of corporate debt are growing, with tech companies leveraging private financing, sometimes obscuring risk from shareholders. Experts note that mounting debt and “circular investing”—such as Nvidia’s indirect capital routes through AI customer companies—could exacerbate volatility once market sentiment shifts.

Market Metrics Signal Overheating

Despite healthy debates, concrete signs increasingly hint at overheating. Among key factors:

• Valuations: The Nasdaq trades at a forward P/E multiple of over 30—significantly above historical averages.
• Debt Levels: AI firms are tapping both public and private debt markets at a record pace, sometimes using creative financial engineering to fund growth.
• Speculative Activity: Flows into AI-focused ETFs and thematic funds have set new quarterly records in 2025, according to BlackRock.

Wall Street consensus is shifting toward caution, but some say the rally can continue as long as AI spending and enterprise adoption remain robust. Ride the wave while it’s here, regardless of how expensive the market is getting, suggested several analysts in recent research notes.

Outlook: AI’s Potential—and Its Perils

The contrasting perspectives of Bezos, Solomon, and prominent bulls underscore the duality of the current AI boom: genuine, even revolutionary, innovation paired with rapidly inflating valuations and FOMO-driven investment. While the future of AI is bright, the ride for markets—and investors—may be bumpy as the industry matures and capital chases the next breakthrough.

For now, vigilance is key as Wall Street and Silicon Valley balance the promise of artificial intelligence against the timeless risks of speculative excess.