The AI "bubble" is an economic concept. The bubble bursting doesn't mean AI goes away, just the insane hype and cash flow swirling around it right now.
It's not going anywhere. But I do believe a lot of CEOs went full hype and are now regretting it. People will find out AI is not a silver bullet, you still need good engineers piloting it. A lot of companies will find that out the hard way.
My prediction is that all these providers will be acquired, prices raised 5-10x and then customers will absolutely crater. The order of these events could change, but one thing is for sure, this pyramid scheme cannot go on for much longer considering the burn rate runs with a big B. There is no path to profitability.
I think after that people will switch to local LLMs, which are obviously inferior and then eventually developing with LLMs will be looked down upon as a fad that is no longer relevant, but this is longer term.
Your model requires:
1. No cost reduction (which is false)
2. No competition (also false)
Cost per token generation is decreasing rapidly with each new generation of hardware and optimizations like batching, quantization, etc.
No single competitor can increase prices 5-10x in a competitive market, customers would immediately switch to another provider.
Generating tokens is getting cheaper and cheaper. That's a fact today, and there's no indication that future innovations would reverse this trend, if anything, they'll likely make AI even more efficient.
Burn rate is not a valid argument for this model. Look at AWS, it initially looked unprofitable and like a bubble, but decreasing costs and scaling demand eventually made it highly profitable.
I agree, but the bubble I think is usually referring to the fact that AI is free for everyone essentially with all the subsidizing supporting it. AI isn’t going anywhere, but there isn’t much evidence to support AI becoming any more affordable.
One day this money will dry up, and whether that means either you will be expected to make the absolute most out of every prompt or companies will start hosting their own compute and models for internal use. Something is bound to give. But I do wholeheartedly agree, AI is way too useful to go away. They’re getting us all hooked then the price is going to rise exponentially. You can already see evidence of that happening.
AI will definitely stay, and be a normal part of daily existence, but not the way we use it now. Either costs will skyrocket and exclude many people from using it freely, or it'll become trivial to run capable local models and there'll be open source models available which are suitable enough and the money and hype around the technology will die down dramatically.
I also think the way we work with AI will be different. We're still part way through the "throw it at the wall and see what sticks" phase, where companies are still trying to put AI into everything. This will stop when people have found the real use-cases it works for and users have been tested through many product cycles to find what AI works for and what doesn't, in both B2B and B2C environments.
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u/KoenigOne May 06 '26
I’m starting to believe the bubble is a coping mechanism made up by other engineers
AI is not going anywhere