Money was no object for the AI industry in early 2025. A vibe check crept in the second half of the year.
The first half of 2025 matched the fervor, and investor interest, of the prior year. That mood has shifted in recent months to deliver a vibe check of sorts. Extreme optimism for AI, and the accompanying wild valuations, is still intact. But that rosy view is now being tempered with concerns over an AI bubble bursting, user safety, and the sustainability of technological progress at its current pace.
The era of unabashed acceptance and celebration of AI is fading just a skosh at the edges. And with it, more scrutiny and questions. Can AI companies sustain their own velocity? Does scaling in the post-DeepSeek era require billions? Is there a business model that returns a sliver of the multi-billions of investment?
We’ve been there for every step. And our most popular stories of 2025 tell the real story: an industry hitting a reality check even as it promises to reshape reality itself.
The biggest AI labs got bigger this year.
We’ve also seen smaller, new startups get a hypey boost from froth-mouthed investors.
These absurdly large valuations are still happening even against the backdrop of still-modest enterprise adoption figures and serious infrastructure constraints, heightening fears of an AI bubble.
For the larger firms, those numbers aren’t coming from nowhere. Justifying those valuations requires building vast amounts of infrastructure.
Even as AI investment remains enormous, the infrastructure reality is beginning to temper the hype.
As the size of each leap between new models shrinks, investors are focused less on raw model capacity and more on what’s wrapped around it. The question is: who can turn AI into a product that people rely on, pay for, and integrate into their daily workflows?
In a market where it’s getting tougher to differentiate by dropping a new model, owning the customer and the business model is the real moat.
AI companies received unprecedented scrutiny in 2025. More than 50 copyright lawsuits wound through the courts, while reports of “AI psychosis” – the result of chatbots reinforcing delusions and allegedly contributing to multiple suicides and other life-threatening episodes – sparked calls for trust and safety reforms.
Perhaps most telling: the calls for restraints are not coming from the usual anti-tech suspects.
If 2025 was the year AI started to grow up and face hard questions, 2026 will be the year it has to answer them. The hype cycle is starting to fizzle out, and now AI companies will be forced to prove their business models and demonstrate real economic value.
The era of ‘trust us, the returns will come’ is nearing its end. What comes next will either be a vindication or a reckoning that makes the dot-com bust look like a bad day of trading for Nvidia. Time to place your bets.
International