Fed’s Jerome Powell Says AI Investment, Spending Not a Bubble

‘This is different’ than the dot-com bubble, Fed Chair Jerome Powell said.

Federal Reserve Chair Jerome Powell speaks at a news conference following the Federal Open Market Committee (FOMC) meeting in Washington on Oct. 29, 2025. Madalina Kilroy/The Epoch Times

Federal Reserve Chairman Jerome Powell said on Oct. 30 that the immense growth in artificial intelligence (AI) investment spending is not a bubble akin to the 1990s.

Powell, speaking to reporters at a post-meeting press conference, said the current AI buildout is different from the dot-com bubble.

During the dot-com boom, he noted, many companies’ valuations surged before filing for bankruptcy because of large losses. Instead, today’s AI investments in chips, data centers, and the overall infrastructure are contributing to broader economic growth.

“This is different in the sense that these companies, the companies that are so highly valued, actually have earnings and stuff like that,” Powell said.

“The investment we’re getting in equipment and all those things go into creating data centers and feeding the AI, it’s clearly one of the big sources of growth in the economy.”

Ultimately, the leading companies in AI are developing the infrastructure, he said, while the behemoths in the dot-com bubble were “ideas rather than companies.”

He stopped short of naming specific companies, but today’s tech juggernauts have been pouring billions of dollars into the new technology.

Chipmaker Nvidia recently crossed the $5 trillion market cap, with its share price rising after CEO Jensen Huang confirmed $500 billion in AI chip orders and announced plans to build supercomputers for the U.S. government.

Market watchers have debated whether the present AI boom is drawing parallels to the dot-com bubble of the 1990s and early 2000s or is unlike the tech-fueled mania a quarter-century ago.

Today’s landscape is different, according to Jeff Buchbinder, chief equity strategist at LPL Financial.

“One is that spending is being done by such cash-rich companies with pre-existing business models generating massive cash flow,” Buchbinder said in a note emailed to The Epoch Times.

“Another thing that makes this cycle different from the late 1990s is that so little capital has gone into tangential businesses lacking a strong business case.”

At the same time, the level of concentration in mega-cap tech giants is more extreme than it was back then. According to Apollo chief economist Torsten Slok, the performance of the tech index relative to the S&P 500 is greater than the tech bubble.

But the growth is based on strong fundamentals rather than speculation—or irrational exuberance—according to Peter Oppenheimer, chief global equity strategist at Goldman Sachs Research.

“The appreciation of the technology sector has, so far, been driven by fundamental growth rather than irrational speculation about future growth,” Oppenheimer recently wrote.

Despite rocketing valuations, he wrote, they are “not yet at levels consistent with historical bubbles.”

An iPal AI-powered educational robot is displayed at the AvatarMind booth during the CES 2019 consumer electronics show at the Las Vegas Convention Center in Nevada on Jan. 8, 2019. Robyn Beck/AFP via Getty Images

Powell’s remarks come as the Federal Reserve lowered interest rates by a quarter point for the second consecutive meeting. He also spooked investors when he said a December rate cut was “not a foregone conclusion. Far from it.”

‘Implications’ for the US Labor Market

The growth and prevalence of AI will also “have implications for job creation,” according to the central bank chief.

“You see a significant number of companies either announcing that they are not going to be doing much hiring or actually doing layoffs. And much of the time, they’re talking about AI and what it can do. So we’re watching that very carefully.”

Monetary policymakers and economists have weighed the potential effects AI may have on the labor market.

For now, AI adoption is ubiquitous among large companies, while levels are minuscule among smaller firms, according to Christopher Waller, a member Fed Board of Governors. This makes it harder to determine the impact of AI on labor demand.

“Overall, I see AI as a short-term risk for the labor market, but, in the long run, AI should bring productivity gains that will be welfare improving,” Waller said in a speech at an Oct. 16 Council on Foreign Relations event.

AI-related layoffs have begun piling up across the U.S. labor market.

Amazon recently stated that it will trim approximately 14,000 corporate jobs as it spends more on AI. Food giant Nestlé is erasing 16,000 positions globally as part of broader cost-cutting efforts and a push into artificial intelligence. Lufthansa Group stated that it would reduce its payroll by 4,000 in the coming years as it accelerates AI adoption and digitalization.

A recent Resume.org survey found that four in 10 companies plan to replace some workers with AI by next year.

Like the dot-com bubble, economic observers are split as to whether AI is starting to decimate the U.S. labor market.

Despite growing concerns about the future of white-collar occupations, they will likely stabilize next year, according to Bill Adams, chief economist at Comerica Bank.

“[The year] 2026 will likely see a stabilizing job market for white-collar occupations, as a broadening of economic growth fuels hiring in some industries at the same time that AI adoption slows hiring in other industries,” Adams said in a note emailed to The Epoch Times.