The AI Bubble Review: Signs, Predictions, and the Inevitable Burst
Current State of the AI Market
This AI Bubble Review examines the artificial intelligence landscape, which is showing significant signs of being in a bubble. Despite massive investments and widespread enthusiasm, fundamental economic indicators suggest trouble ahead. A recent MIT study revealed that 95% of organizations are getting “zero return” from their generative AI investments. This startling statistic raises serious questions about the sustainability of the current AI boom.
Adding to these concerns, major news outlets are increasingly questioning whether we’re witnessing the formation of an AI bubble. Meta has already frozen AI hiring, signaling a potential shift in the industry’s trajectory. Despite these warning signs, some companies continue to receive massive investments, creating a dichotomy that characterizes bubble markets. This AI Bubble Review will explore the signs that suggest trouble ahead.
Investment vs. Reality
The investment landscape presents a stark contrast to the actual returns being generated. Anthropic is reportedly raising up to $10 billion, while OpenAI allegedly hit $1 billion in revenue in July, with projected 2025 revenue estimated at $5.26 billion. These figures, while impressive, raise questions about sustainability when 95% of organizations see no return on their AI investments. As part of this AI Bubble Review, we must consider the stark contrast between investment and actual returns.
Predicting the Timeline
While predicting an exact timeline for the bubble’s burst is challenging, we’re clearly in a period of what former Federal Reserve Chairman Alan Greenspan called “irrational exuberance.” The market is fixated on something expensive without clear justification. This AI Bubble Review suggests that we’re in a period of irrational exuberance. A venture capitalist I’ve spoken with predicts it will take about six quarters for AI companies to run out of funding at the current investment rate, pointing to a potential collapse around February 2027.
The Lynchpin Events That Will Shock the System
This AI Bubble Review identifies seven key events that could trigger the collapse. These developments would fundamentally alter the AI landscape and potentially lead to the bubble’s burst.
1. NVIDIA’s Growth Will Slow
NVIDIA is a weak point in the “Magnificent Seven” group of stocks, which collectively make up 35% of the U.S. stock market. NVIDIA alone accounts for 19% of that value. Its success is driven entirely by its ability to sell more and more GPUs every quarter. When its growth inevitably slows, the entire AI narrative built around it will begin to crumble. Even a single down quarter could trigger a major market reaction.
2. AI Funding Will Start to Dry Up
AI companies are uniquely dependent on funding. According to a venture capitalist at Decibel Partners, if VCs continue investing at their current pace, the industry could run out of money in six quarters. While OpenAI and Anthropic are still getting huge amounts of capital, most other companies will be starved of funding.
3. A Major AI Company Will Collapse
Both OpenAI and Anthropic burn billions of dollars a year. OpenAI’s CEO, Sam Altman, has said the company is willing to “run at a loss” indefinitely. For the bubble to burst, one of these companies will have to fail. Going public is also a challenge, as it would expose what I believe are their “rotten economics” to public scrutiny.
4. Big Tech Will Turn on AI
Meta’s hiring freeze is not enough. For the bubble to burst, companies like Meta, Google, Amazon, or Microsoft will need to significantly reduce their capital expenditures for AI. They need to signal to the market that they’ve “built enough” or have “exceeded the opportunity” in AI. These companies are generating very little revenue from AI—and the markets haven’t really challenged them on it yet.
5. AI Startups Will Start to Fail
Many AI startups have raised money at valuations so high that it will be impossible for them to ever be acquired or go public. As funding dries up, many of these companies will die.
6. CoreWeave Will Die
AI data center developer CoreWeave is a “time bomb.” Burdened with “deteriorating operating income,” the company is a critical partner to OpenAI and holds a massive, multi-billion dollar loan. If they can’t finish their data center development on time and make their loan payments, it could send a shockwave through the industry.
7. OpenAI’s “Stargate” Project Will Fail
OpenAI’s alleged 4.5 Gigawatt data center project with Oracle, nicknamed “Stargate,” would require OpenAI to pay Oracle $30 billion a year by 2028. This is more than OpenAI has raised and earned to date. If this expansion doesn’t happen, it’s a bad sign. If it does, OpenAI will need to generate a monthly revenue of over $4 billion just to make it feasible.
The Broader Cultural and Economic Impact
This AI Bubble Review also considers the cultural and economic implications of the bubble’s burst. So far, the problems with AI—such as its high cost and lack of revenue—have been largely ignored, dismissed as the necessary costs of a technological revolution. But as the problems begin to unravel, criticism will increase.
Many executives and managers have embraced AI as a way to control labor, seeing it as a magical tool that validates their “ideas men” mentality. They have convinced themselves that AI is the future of automation, even though these large language models are terrible at it. This “AI-first” culture will be difficult to unwind until the first major company does it—then everyone else will follow.
The generative AI boom will be remembered less for its innovation or returns, and more for its ability to expose a fundamental truth about our economy. It has shown how little our leaders understand about the real world and labor, how easily our markets are driven by people with a tenuous grasp on reality, and how willing many people are to accept whatever the last “smart-adjacent” person said.
Preparing for the Inevitable
For solopreneurs and small business owners, navigating the impending AI bubble burst requires strategic planning. This AI Bubble Review offers guidance for solopreneurs and small businesses. While AI tools can still provide value when used appropriately, it’s essential to avoid over-investment in unproven technologies. Focus on practical applications that deliver immediate ROI rather than speculative AI implementations.
For those looking to build sustainable business models that leverage technology effectively, consider exploring content creation strategies for solopreneurs with AI that emphasize practical, results-driven approaches rather than hype-driven implementations.
Conclusion: The Inevitable Burst
The AI bubble, like all bubbles before it, will eventually burst. The combination of unsustainable investment levels, minimal returns for most organizations, and the fundamental economic challenges facing even the industry leaders creates a perfect storm. When the bubble bursts, it won’t be a single dramatic announcement but rather a series of events leading to a pullback from big tech companies, a freeze in investment money, and the subsequent failure of many current AI companies.
In conclusion, this AI Bubble Review has outlined the factors that point to an inevitable burst. I believe the events outlined here could happen over the next 18 months, leading to the collapse of the AI bubble. The bursting of this bubble will serve as a valuable lesson in distinguishing between genuine technological innovation and market hype. For businesses and investors, the key takeaway should be to focus on sustainable value creation rather than speculative investments in technologies that haven’t proven their economic viability.
