Will the AI bubble burst… or just deflate?

Talk of Artificial Intelligence dominates 2025 headlines — from trillion-dollar valuations to everyday apps powered by generative models. But with soaring investments and shaky profits, experts are asking: Is this an AI bubble ready to burst, or a sustainable revolution?

Signs the Bubble May Pop

Sky-high valuations.
AI startups raised a record $73 billion in Q1 2025, making up 58% of global VC funding. Many have little revenue, echoing the dot-com frenzy (Reuters). Economist Torsten Sløk even warns that today’s AI overvaluation “could be worse than the dot-com crash.” 

Weak monetization.
An MIT study found 95% of companies see no meaningful financial return from AI investments yet. Infrastructure spending dwarfs real consumer demand, a warning sign of unsustainable growth.

Technical and scaling limits.
AI faces diminishing returns from more data and compute, rising energy demands, and limited new training material. These constraints could stall progress and profitability.

Market mania
Speculative behavior abounds — AMD’s stock recently jumped 40% in a day. Veteran investor Bill Smead says people are chasing AI stocks “like dogs chase cars.”  Even OpenAI CEO Sam Altman admits “AI is in a bubble.”

Why It Might Not Collapse Entirely

Despite the froth, AI differs from past bubbles in crucial ways.

Deep integration
AI is already embedded in corporate infrastructure, chip design, and cloud ecosystems. Giants like Microsoft and Nvidia have made multi-year, irreversible bets. 

Resilient survivors
If the bubble pops, weaker firms may vanish, but core players will consolidate — just as Amazon and Google emerged stronger after the dot-com crash.

Enduring value
Even a correction could refocus investment on genuine ROI from industrial automation to healthcare analytics, thereby ensuring long-term productivity gains. [Read Bloomberg report]

The Most Likely Outcome: A Soft Landing

Rather than a dramatic collapse, experts foresee a “controlled deflation.”
Overvalued startups will fade, capital will flow to proven applications, and the hype will cool. The correction could actually strengthen the AI sector by cutting excess and emphasizing results.

My thoughts?

Yes, the AI boom has bubble traits — inflated valuations, feverish hype, and weak profits. But unlike fleeting tech crazes, AI is already woven into the fabric of modern business. Expect turbulence, not extinction.

The AI bubble may not burst. It may simply shrink to a sustainable size.