Home / Technology / AI Bubbles: Which Will Burst First?
AI Bubbles: Which Will Burst First?
19 Jan
Summary
- AI ecosystem has three distinct layers: wrappers, foundation models, infrastructure.
- Wrapper companies are most vulnerable, facing rapid obsolescence.
- Infrastructure layer is built to last, retaining value across AI applications.
The AI ecosystem is not a single entity but comprises three distinct layers, each with unique economic models and risks. Wrapper companies, which repackage existing AI models with interfaces, are identified as the most vulnerable segment and are expected to face significant failures by late 2025 through 2026. Their business models are threatened by feature absorption from major platforms and the commoditization of AI capabilities, leading to evaporating margins.
Foundation model builders like OpenAI and Anthropic occupy a more defensible middle ground but are still precarious. While possessing technological moats, their long-term sustainability depends on engineering advancements in inference optimization and systems. Consolidation is anticipated in this segment between 2026 and 2028, with a few dominant players emerging.
Conversely, the infrastructure layer, encompassing hardware and cloud providers, is considered the least bubbly. Investments in data centers, chips, and memory systems are expected to retain value, similar to the fiber optic cables from the dot-com era, as they will power future AI applications. While short-term overbuilding is possible, this layer is built for long-term utility.
