If the AI boom collapses, it won’t be as catastrophic as the dot-com crash — but the shockwave will be felt far and wide, Igor Pejic says.
The banker and author of a new guide for tech investors titled “Tech Money” told Business Insider this week that Big Tech’s unprecedented dominance will limit the magnitude of any market decline.
Pejic underscored the greater “stickiness” of companies like Alphabet and Microsoft compared to the leading companies of the past, such as Exxon Mobil, General Motors, and IBM.
Big Tech companies have remained dominant for decades partly because of their platform models, which give them “almost limitless pricing power” and make them “almost impossible to dislodge,” he said.
In other words, they’ve become powerfully entrenched by attracting so many users, app developers, hardware suppliers, advertisers, and other parties to their ecosystems over time. Now they can easily hike their fees, and new market entrants struggle to capture any market share from them.
Pejic also pointed out that Apple, Meta, and their peers have successfully navigated multiple technological shifts, such as moving from desktop computers to mobile devices and from on-premises IT equipment to cloud hosting.
Big Tech companies also throw off gobs of cash, enabling them to place several big bets at once, and fund their investments instead of relying on costly external financing. Pejic described that as a “moat” against rivals, especially in an AI race characterized by “tremendous infrastructure costs.”
Shades of the past
Pejic drew several parallels between the AI boom and the dot-com bubble. The similarities include a game-changing technology, partnerships and financing deals between key players, the buildout of network infrastructure, and “extreme” valuations, he said.
Yet Pejic said an AI crash would “not be as devastating as the dot-com bubble when it burst.”
Any market sell-off will be briefer and less severe because today’s tech giants have highly profitable core businesses, he said, meaning their stock prices won’t collapse completely if their AI bets flop.
They’re also less likely to suffer a cash crunch or trigger a financial crisis given their limited reliance on bank funding, and investors have been more discerning about which AI stocks they buy versus rushing to own any business with “.com” in its name, he said.
Pejic did raise some concerns, including the fact that so many companies are spending huge amounts to build the best AI model possible, but the market can probably only support a few of them in the end.
He also flagged the immense amount of investor cash riding on a handful of tech stocks, given the rise of index funds that own indexes such as the S&P 500, which is weighted by market capitalization and thus intensely concentrated in the Magnificent Seven.
“It’s very difficult to find a place to hide if this really goes down,” Pejic said. “If you’re keeping your money in the stock market and AI goes down, it will affect everything.”
He noted that risk will only become greater as AI giants such as OpenAI, xAI, and Anthropic go public and join the index, increasing everyday investors’ exposure to AI.
Pejic said owning Big Tech stocks was “perhaps the safest way” to profit from AI, given their self-reliance, vast resources, and diversified businesses, which should limit their downside and insulate them from industry shocks such as the emergence of DeepSeek.
For example, he praised Apple’s approach of refraining from spending hundreds of billions on microchips and data centers, in favor of seeing how the AI race plays out, and partnering with peers or buying in capabilities to harness the tech.
Apple might not be the “most exciting company,” but for investors, owning it is a “clever and quite safe strategy without burning too much cash,” he said.
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