Is the AI Bubble a 'Return of the IT Bubble'?—Decoding 2026 Through Policy Interest Rates

I often see the observation that ‘the AI market is similar to the 2000 IT bubble.’ Rather than relying on intuition, I will organize the similarities and differences by using policy interest rates as a common yardstick to examine what actually happened in both periods.

Policy Interest Rates as a ‘Common Language’

Comparing stock indices directly is difficult because their components and valuation levels differ by era. On the other hand, the Federal Reserve’s policy interest rate can be used as a common yardstick to indicate the ‘degree of tension in the financial environment’ in any era. I will focus on what happened after the rapid interest rate hikes.

1. The Trajectory of the IT Bubble Burst (1998–2003)

The Fed continued to raise interest rates from mid-1999, peaking at 6.50% in May 2000. However, the Nasdaq Composite Index, which hit 5,048.62 on March 10, 2000, subsequently plummeted. The economy entered a recession from March to November 2001 (as certified by the NBER), and compounded by the 9/11 terrorist attacks, the Fed carried out a series of emergency rate cuts, lowering rates 13 times to 1.00% by June 2003. The Nasdaq fell to 1,114.11 on October 9, 2002, a decline of approximately 78% from its peak. It took a full 15 years (until April 2015) to recover to the highs of that time.

2. The Trajectory of the Current ‘AI Market’ (2022–2026)

This cycle also began with rapid interest rate hikes. Seven hikes were implemented in 2022, and in July 2023, rates reached 5.25–5.50%, the highest level in 22 years. Rate cuts proceeded in stages from the second half of 2024 through 2025, falling to 3.50–3.75% in December 2025. However, entering 2026, after a wait-and-see period from January to July, the Fed resumed interest rate hikes to 3.75–4.00% on September 16. This was the first rate hike in three years, since July 2023.

▼ The chart below compares the policy interest rates of both periods.

What is similar and what is different?

Points that can be identified as commonalities

The fact that the premises of the market are changing after rapid interest rate hikes, and that funds and expectations are concentrated in a few stocks (the dot-com companies of that time, the major AI-related companies of today), are indeed structurally similar. Furthermore, the five major tech companies—Amazon, Microsoft, Google, Meta, and Oracle—are expected to see AI-related capital investment exceed $1 trillion in 2026, with that investment amount exceeding their own cash flow and increasing their reliance on borrowing, such as through corporate bond issuance. This composition can be said to resemble the pattern common to past technological booms—canals, railroads, electrification, and dot-coms—where ‘tangible technological innovation absorbs funds beyond commercial profitability.’

The ‘Unexpected Turning Point’ of the September 2026 Rate Hike Resumption

What I personally want to focus on is the fact that the Fed, which had been cutting rates until December 2025, turned around and raised rates in September 2026. This suggests a shift from a phase of ‘easing monetary policy to support the economy’ to a phase of ‘responding to some form of inflationary pressure,’ and it has been pointed out that the robust AI-related capital investment may be affecting prices and inflation expectations. While the year 2000 saw a recession and rapid rate cuts following the rate hikes, the current situation is a major difference in that we are facing a turning point in the opposite direction: a rate hike following rate cuts. At this moment, no one knows which way it will turn from here.

※ This article is for informational purposes only and does not recommend any specific investment behavior.