I just saw someone discussing the risks of an AI bubble again, which reminded me of a classic case—the internet bubble era. Honestly, that history is really helpful for understanding today's market dynamics.

Let me revisit that crazy time. In the mid-1990s, the internet transformed from a niche technology into a tool everyone could use. PCs became cheaper, dial-up internet became widespread, and suddenly everyone could go online. Companies also realized that the internet could fundamentally change sales, marketing, and customer interaction. This excitement, combined with continuous venture capital funding, was like injecting adrenaline into the market.

Venture capital firms started competing wildly, rushing to pour money into every startup promising to disrupt traditional industries. By around 1998, this enthusiasm had fully evolved into a market frenzy. The Nasdaq index was soaring nearly vertically, with wave after wave of dotcom companies flooding the stock market. New IPOs could double or even triple on their first day, making ordinary investors feel that wealth was just around the corner.

The most outrageous part was that those dotcom companies with no revenue, no profit, and even no clear business model could still achieve valuations in the billions of dollars. As long as the company name ended with ".com," the stock price could skyrocket overnight. Traditional valuation metrics were thrown into the trash, replaced by illusory indicators like website traffic and user numbers. The media also fueled the hype, daily touting stories of dorm-room startups turning into millionaires.

Retail investors, driven by FOMO, abandoned diversification principles and bet all their chips on tech stocks. Day trading became a nationwide movement. The market was completely dominated by emotion and momentum, with fundamentals long forgotten.

But what was the real truth behind these dotcom companies? They were burning money at an astonishing rate. To acquire users, build infrastructure, and invest in marketing, these companies needed a continuous flow of capital. Profitability? That was a distant future. Quarterly reports showed increasing losses, but investors interpreted this as proof of "super-fast growth."

In early 2000, the Federal Reserve began raising interest rates, trying to cool down the overheated economy. This move changed everything. Higher interest rates made financing difficult, and unprofitable tech companies started running out of cash. Meanwhile, some large tech firms released disappointing earnings reports. Market confidence shattered instantly.

The subsequent crash was catastrophic. After reaching a peak in March 2000, the Nasdaq declined nearly 78% over two years. Companies that once symbolized the limitless potential of the internet evaporated their entire market value within months. Thousands of startups went bankrupt, Silicon Valley office buildings emptied out, and tens of thousands lost their jobs. Investors’ savings were completely wiped out.

But here’s an interesting twist. Although most dotcom companies died, a few survivors—like Amazon and eBay—made it through. What did they do right? Focused on real profits, controlled costs, and built sustainable business models. This illustrates an important lesson: bubbles burst, but truly transformative technologies and companies survive.

Now looking at the AI market, I see some familiar patterns. AI is indeed powerful, and the market has assigned it extremely high valuations. Some say "this time is different"—a phrase that was popular in the late 1990s. Back then, people said the internet changed the fundamental rules of economics, and now the same is being said about AI.

A frequently discussed question: Is Nvidia the new Cisco? Cisco was the infrastructure king during the internet bubble era, but its stock price fell so much that 25 years later, it still hasn't reached new highs. But Nvidia and Cisco have a key difference: Nvidia now has real cash flow, pricing power, and actual product demand. That’s a very important distinction.

However, even with strong fundamentals, if valuations are overwhelmed by excessive speculation, problems will arise. History repeatedly reminds us: cash flow, sustainability, operational efficiency, and real utility—these are what truly matter. The market may temporarily favor growth stories, but long-term value comes from companies that turn innovation into repeatable, profitable results.

Investor psychology remains largely unchanged. Fear, greed, herd mentality, and narrative biases repeatedly push asset prices to crazy heights. The dotcom bubble reminds us that even world-changing technologies, if expectations surpass reality, will undergo a correction.

Ultimately, the internet bubble is not just a story about overvaluation and speculative madness; it also reshaped the entire tech landscape. Although trillions of dollars in market value vanished, it also proved the resilience of truly innovative companies. Today, as AI and other disruptive technologies ignite investor imagination, the lessons from the late 1990s remain crucial: stay disciplined, stay skeptical, and focus on sustainable business models. That’s the only way to balance breakthrough opportunities with excessive speculation.