Earlier this month, Advanced Micro Devices (NASDAQ: AMD) shares soared after announcing a major deal with OpenAI, briefly adding nearly $100 billion to its market value.
The agreement, which could lead to billions in future revenue, has been hailed by analysts as a defining moment for AMD’s competitive position against Nvidia (NASDAQ: NVDA) in the race to dominate AI chip production.
Benchmark analyst Cody Acree called the announcement “a ringing endorsement” of AMD’s progress, boosting the firm’s price target to $270.
But while investors piled in, others warned that the rally, along with recent double-digit jumps in giants like Oracle (NYSE: ORCL),is showing signs of excess. Oracle’s own AI-related surge last month added $255 billion to its market value in a single session, fueled by a $300 billion cloud partnership with OpenAI over five years.
Familiar Signs of Euphoria
These extraordinary moves have drawn comparisons to the late 1990s, when technology stocks inflated far beyond fundamentals before the dot-com bubble burst.
“If any one of these deals falls through it has this domino effect downstream that I think is concerning,” said Brian Mulberry of Zacks Investment Management, which oversees roughly $12 billion in assets. “It reminds me of what happened with telecom back in the mid-nineties.”
Adding to the unease is the concentration of today’s market leadership. The top technology names now make up roughly 35% of the S&P 500, compared with less than 15% before the dot-com collapse.
“The market is pricing these deals as if everyone who transacts with OpenAI will be a winner,” said Michael O’Rourke, chief market strategist at Jonestrading. “OpenAI is a negative cash flow company and has nothing to lose by signing these deals. Investors should be more discerning.”
“More Explosive Than 1999”
Hedge fund billionaire Paul Tudor Jones told CNBC this week that the setup “reminds him of the dot-com bubble,” saying all the ingredients for a speculative blow-off are in place.
“History rhymes a lot,” he said. “I would think some version of it is going to happen again.”
Analysts are also pointing to what they describe as circular capital structures in these AI-linked partnerships, where companies use each other’s products and money to drive growth narratives.
Mulberry noted that such feedback loops can amplify valuations without corresponding increases in real productivity or profit.
Ted Mortonson, a technology strategist at Baird, called the price action “part of the exuberance bundle.” He added that seeing large companies gaining so much market value rapidly is “not good and normal.”
Between Innovation and Inflation
To be fair, the enthusiasm isn’t entirely misplaced. AMD’s deal with OpenAI does mark a significant milestone in the GPU market, signaling a genuine competitive challenge to Nvidia’s dominance. The AI revolution is real, and companies at the center of it are poised for substantial long-term gains.
Yet, as with every period of technological transformation, the question remains: how much of today’s valuation reflects tomorrow’s potential, and how much is simply momentum chasing momentum?
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