WSJ Tech News Briefing: Is the AI Boom Heading for a Bust? What the Dot-Com Bubble Tells Us

Release Date: March 12, 2025

In the March 12th episode of WSJ Tech News Briefing, hosted by Shara Tipkin, the Wall Street Journal delves into the burgeoning impact of artificial intelligence (AI) on data centers and draws parallels between the current AI boom and the infamous dot-com bubble of the early 2000s. Through expert insights and detailed discussions, the episode explores whether today's AI investments are paving the way for a revolutionary technological advancement or heading towards an inevitable market correction.

AI's Insatiable Appetite for Data Storage

The episode opens with an examination of how AI’s exponential growth is driving demand in the data center industry. AI requires vast amounts of data to train its models, leading to significant investments in data storage solutions. According to consulting firm IDC, data centers spent an estimated $40 billion on storage devices last year, with projections indicating a 31% growth over the next two years.

John Keilman, a WSJ reporter, provides an in-depth analysis of the storage landscape:

“[AI] requires stupendous amounts of data to train their models. ... all of these devices that are in a data center need to be able to hold more and more data.” (01:38)

Keilman explains the ongoing competition between traditional hard disk drives (HDDs) and solid-state drives (SSDs). While HDDs remain cost-effective, SSDs offer superior speed but at a higher price point. This competition is intensifying as both types of storage solutions strive to enhance their capacities to meet AI’s demands without expanding the physical footprint of data centers.

Seagate’s Innovation: Staying Relevant in a Shifting Market

To maintain relevance amidst the surge in AI-driven storage needs, companies like Seagate are innovating continuously. Keilman highlights Seagate’s advancement in hard drive technology:

“Seagate has come up with something called heat assisted magnetic recording... they are so magnetically powerful that you basically have to weaken their magnetism for a tiny portion of time so that the magnet can flip it up or down.” (02:27)

Seagate has recently introduced a hard disk drive capable of holding 36 terabytes of data, with expectations to reach 60 terabytes within a couple of years and potentially 100 terabytes before exploring new technologies. These innovations underscore HDDs' adaptability and economic efficiency, positioning them as indispensable components in modern data centers.

Drawing Parallels: AI Boom vs. Dot-Com Bubble

The discussion transitions to a historical perspective, comparing the current AI boom to the dot-com bubble that peaked and subsequently crashed around 25 years prior. Rolf Winkler, WSJ tech reporter, provides a nuanced perspective on this comparison:

“There's a lot of really promising opportunities... we're not really sure how we're going to use them all just yet. Is there revenue behind all this investment that justifies the investment? Not yet.” (05:11)

Winkler distinguishes between good and bad bubbles. He cites historical instances where speculative bubbles, driven by revolutionary technologies like canals, railroads, and electrification, ultimately led to significant productivity enhancements despite initial overenthusiasm and eventual market corrections. In contrast, bad bubbles, such as the housing crisis, do not contribute to long-term productivity.

Lessons from the Dot-Com Era: Innovation Beyond Failure

Reflecting on past failures, Winkler discusses companies like Pets.com and Webvan, which despite their collapse, paved the way for successful successors like Chewy and Instacart. He emphasizes that these early ventures were "just ahead of their time," lacking the necessary infrastructure and market readiness.

Moreover, Winkler highlights General Magic, a pioneer in smartphone technology from the early '90s. Although it failed commercially, many of its alumni went on to create foundational technologies in modern smartphones, showcasing how early failures can incubate future successes:

“The alums that came out of General Magic have helped power the smartphone revolution.” (09:30)

Current Market Dynamics: Winners and Losers

Winkler addresses the current market landscape, identifying Nvidia as a significant winner due to its pivotal role in supplying GPUs essential for AI data centers:

“Who won in the gold rush? Levi Strauss won selling everybody jeans. And whoever sold the picks and shovels, it wasn't necessarily gold miners. Nvidia is winning because everybody has to buy its chips to put in these data centers to power their models.” (10:11)

However, he questions the productivity of these investments and whether they will yield transformative AI products in the near future or if the most impactful innovations are still a decade away.

Conclusion: Navigating the AI Investment Landscape

The episode concludes by underscoring the importance of distinguishing between speculative excitement and sustainable technological advancement. While the AI boom mirrors the dot-com era’s exuberance, the potential for revolutionary productivity gains suggests that, despite possible market corrections, AI could ultimately drive significant economic and technological progress.

Shara Tipkin wraps up the briefing by acknowledging the contributions of the production team and teasing the upcoming segment, leaving listeners with a comprehensive understanding of the current AI landscape and its historical parallels.

Notable Quotes:

• John Keilman (01:38): “[AI] requires stupendous amounts of data to train their models. ... all of these devices that are in a data center need to be able to hold more and more data.”

• John Keilman (02:27): “Seagate has come up with something called heat assisted magnetic recording... they are so magnetically powerful that you basically have to weaken their magnetism for a tiny portion of time so that the magnet can flip it up or down.”

• Rolf Winkler (05:11): “Is there revenue behind all this investment that justifies the investment? Not yet.”

• Rolf Winkler (09:30): “The alums that came out of General Magic have helped power the smartphone revolution.”

• Rolf Winkler (10:11): “Nvidia is winning because everybody has to buy its chips to put in these data centers to power their models.”

This comprehensive summary encapsulates the key discussions and insights from the episode, offering readers a clear understanding of the current state of AI investments, storage technology advancements, and historical lessons from the dot-com bubble that inform today's tech landscape.