We’ve Been Here Before: AI and the Pattern of Hype Cycles

AI is a transformative technology, but the current investment cycle appears closer to its peak than its beginning, making valuation discipline essential.

• Gartner’s hype-cycle framework describes a progression from discovery to a peak of inflated expectations and then a trough of disillusionment; Summitry argues that AI is currently on the upslope and probably nearer the peak.
• Historical technology booms produced real economic change but also overcapitalization and investor losses: fiber laid by Global Crossing, Level 3, and WorldCom remained dark for years, while more than 150 railroad companies failed during the Panic of 1893.
• The authors identify circular financing in AI: NVIDIA has committed up to $100 billion to OpenAI, OpenAI signed a $300 billion data-center agreement with Oracle, and Oracle is spending tens of billions with NVIDIA on chips.
• Unlike in 2000, the leading AI infrastructure companies—Meta, Alphabet, Microsoft, Amazon, and Oracle—are profitable and cash-generative rather than thinly capitalized startups.
• These companies began accessing debt markets for AI investment in the fourth quarter of 2025 and continued in 2026; Summitry considers the manageable but new borrowing trend another yellow flag.

Takeaway: Investors should separate the long-term economic importance of AI from the attractiveness of AI-related securities, favoring financially strong companies such as the hyperscalers and Taiwan Semiconductor only when quality and valuation provide a genuine margin of safety.