The AI Bubble: A Technical and Strategic Analysis

Recently, prominent leaders within the tech industry have started to advocate for a more cautious approach. Sam Altman has unequivocally stated that AI is indeed in a bubble, though he acknowledges that this bubble is centered around a “kernel of truth.” Mark Zuckerberg has opined that the existence of an AI bubble is “quite possible,” yet he also posits that if the capabilities of AI models continue to expand annually and the demand persists, a collapse might be averted. Even Eric Schmidt has urged a more measured stance regarding artificial general intelligence, suggesting that the focus should be on competing with China.

The Enigmatic Popping of the Bubble

The question on everyone’s mind is: How will this AI bubble burst? Will there come a day when we wake up and realize that our fascination with Large Language Models (LLMs) has waned? Could someone develop AI tools at a fraction of the current cost, leading to a proliferation of ChatGPT – like applications? Or will we one day see the news filled with images of stock traders frantically gesticulating on the exchange floor as tech companies’ stock prices plummet? The honest answer is that it remains uncertain. However, there is a sincere hope that in the near future, AI will achieve a state of normalcy.

Defining Normalcy in Technology

Normal technologies are characterized by the presence of manuals. They evolve incrementally, allowing individuals to develop specialized skills and expertise. In contrast, bubble technologies are in a constant state of flux, accompanied by the twin threats of either causing societal upheaval or creating a wealth – divide. There are various methods to determine when a technology is transitioning towards normalcy, such as analyzing price – to – earnings ratios. A metric introduced here is the C/B ratio, which is the ratio of conferences to blogging. If a technology is still drawing a significant number of people to conferences, it has not yet reached normalcy. Conversely, when the majority of discussions are taking place through blogs, it indicates that the technology is becoming more mainstream.

The Current State of AI’s C/B Ratio

In the current AI landscape, there is an abundance of conferences and gatherings, while the number of in – depth, technical blog posts remains relatively scarce. The tech industry has a penchant for conferences as the abstract nature of AI products makes it challenging to define one’s position in the competitive ecosystem. This is why venture capital (VC) firms frequently sponsor such events, which serve as platforms for networking, showcasing capabilities, often through PowerPoint presentations.

Historically, the golden age of blogging emerged when financial resources were scarce, and publishing content online was the most cost – effective option. When the flow of capital dries up and startups face setbacks, conference budgets are often the first to be cut. Nerds, however, still seek avenues to share their knowledge, leading to an increase in blog posts. Eventually, the C/B ratio of AI will likely shift in favor of blogging.

The Precarious Global AI Ecosystem

The globalized economy, driven by expediency and greed, has become a vast suspension bridge, anchored by a few major entities like OpenAI, Nvidia, and Google, supported by the promise of a global AI transformation. A minor falter in any of these anchorages, accompanied by unfulfilled promises, could potentially lead to a collapse of the entire AI startup ecosystem. This constant anticipation has added an element of volatility to the year 2025.

Lessons from the Dot – com Crash

While one might expect to dread an AI crash, it could potentially resemble the dot – com crash. During that period, some high – profile failures like Pets.com occurred, but the underlying infrastructure remained intact. Over time, this infrastructure was gradually integrated into various systems. The dot – com crash led to a more accessible and less “magical” tech environment, with a focus on practical applications rather than hype.

The Future of AI in a Post – Bubble World

When AI becomes normal and less glamorous, the era of awe – inspiring demonstrations, like ChatGPT’s outlandish claims or Dall – E’s unique image generation, will likely end. Large companies will continue to dominate the AI space, primarily using it to enhance shopping experiences and streamline advertising. However, there will also be a need for the technical community to educate the public about LLMs, implement safeguards in AI projects, and develop more intelligent chatbots.

In this new landscape, the real enthusiasts, the weekend hackers, will have their moment. With fewer conferences, they will start niche newsletters or contribute to open – source projects, fostering a more diverse and grassroots – driven AI community. This shift from a bubble – driven, high – stakes environment to one of normalcy will bring about a plethora of opportunities for innovation at a more accessible level.

The Path to Normalcy and the Tech Industry’s Future

In recent years, the tech industry has faced challenges, including authoritarian tendencies and a monolithic narrative. There is a longing for a more diverse and chaotic tech landscape, filled with numerous open – source projects and individual – driven blog posts. Ironically, achieving this might require a significant economic disruption, leaving young people with time and resources to tinker with technology.

The good news is that the journey towards AI normalcy is already underway. Even after AI reaches a state of normalcy, some conferences will persist, likely in more modest settings. AI will remain a significant industry, but not the sole focus. The enthusiasm for innovation will endure, as individuals continue to showcase their creations, not for the sake of monetary gain, but for the love of technology.