The current AI-related investment boom has been likened to the tech boom of the late 1990s, with many analysts drawing parallels between the two. However, a closer examination of market imbalances suggests that there are some important differences between the two periods. While the current AI boom may share some similarities with the tech boom of the mid-1990s, there are also some key differences that could impact investment returns.

One key difference is the level of market imbalances during each period. During the tech boom of the late 1990s, there were significant market imbalances, including a widespread overvaluation of technology stocks and a lack of diversification in portfolios. In contrast, while there are certainly pockets of overvaluation in the current AI boom, the overall level of market imbalances is not as pronounced as it was during the tech boom.

Another important difference is the role of central banks in each period. During the tech boom, central banks were largely absent from the financial landscape, allowing market forces to drive asset prices. In contrast, during the current AI boom, central banks have played a much more active role in shaping financial conditions through monetary policy. While this has undoubtedly contributed to the current investment boom, it also raises questions about the sustainability of these gains in the long term.

Despite these differences, there are still some similarities between the two periods that could impact investment returns. For example, both periods have seen a significant increase in speculative activity, with many investors jumping on the bandwagon without fully understanding the underlying technology or investment thesis. This could lead to a similar pattern of overvaluation and subsequent crash, as was seen during the tech bubble of the late 1990s.

Ultimately, while there are certainly some important differences between the current AI boom and the tech boom of the late 1990s, both periods share a common thread: the power of market sentiment to drive asset prices. As such, it is essential for investors to approach these markets with a critical and nuanced understanding of the underlying drivers of the boom, as well as the potential risks and opportunities that may arise in the coming years.