The Bubble Is Real

The AI bubble is more real than some are willing to admit. We should accept that as a matter of fact and plan accordingly. The massive valuations, promises, and infrastructure spend - some of it is justified. But a large portion of the AI industry is running without business fundamentals in place. Revenue is thin, margins negative and the unit economics do not work. Everyone keeps pretending the next funding round will fix it.

I am not convinced that it will.

When the dominos start to fall, even a small misalignment in the business model becomes existential. A company that loses fifty cents on every dollar of revenue cannot grow its way out of the problem. A company whose only moat is access to a foundation model dies the moment that model gets commoditized. A company whose customers were buying hype loses them all the same quarter the hype fades.

The collapse will be loud, and unforgiving.

What survives The AI Bubble will look like what survived the dot-com crash. The companies with real customers, revenue, margins and products solving real problems will thrive. Companies that used AI to build a durable business will be the Amazons and Googles of the next 20 years. They where quiet during the boom, and remain dominant after the bust.

This is a healthy thing, even if it does not feel that way from inside the storm. Bubbles force the industry to remember what a business actually is. The ground gets clearer for the people who were doing the real work all along.

Build something with fundamentals. Charge for it, make it profitable, make it durable, and stop optimizing for the next round and start optimizing for the next decade.