Reference: The AI Wildfire Is Coming. It’s Going to be Very Painful and Incredibly Healthy.
URL Link: https://ceodinner.substack.com/p/the-ai-wildfire-is-coming-its-going
This is a beautifully written article. Beautifully written does not mean accurate.
We are at the stage of the AI Bubble where everyone and their mother is admitting it is a Bubble. This creates a very problematic situation for the ‘True Believers’.
Let’s say you’ve spent the last 4 years pumping up an AI Bubble, and it’s grown way bigger than you had anticipated. You, finally, realize things are completely out of hand.
How do you now distance yourself from this massive AI Bubble? How do you minimize the collateral damage to your reputation when the AI Bubble collapses?
Well, one way is to have people write beautiful articles about ‘The Benefits of Bubbles’ or ‘The Silver Lining to an AI Bubble Collapse’. You can even write them yourselves if you are running out of Spin Doctors.
This article (The AI Wildfire is Coming. It’s Going to be very painful and incredibly Healthy) is a great example of Spin
First, you acknowledge there is an AI Bubble and that it is going to burst.
Second, you immediately launch a claim that it is a very good thing that we had an AI Bubble and that the Bubble bursting is somehow a great thing and ‘incredibly healthy’.
Let’s look at the article in Depth. We will see some beautiful writing and some very interesting ‘reframing’ to make the AI Bubble seem a beautiful thing.
The Fire Season
The article claims that the AI Bubble is not a ‘bubble’ but a cleansing wildfire. This is beautiful imagery.
Instead of admitting that VCs and Tech CEOs created an AI Bubble and wrangled a lot of money out of a lot of people.
Just claim that it is a holy cleansing fire and that it will create the conditions for ‘the next generation of forest to thrive’.
Amusing that VCs and Tech Founders assume the rest of the world are dumb enough to believe that creating an AI Bubble and generating undeserved fortunes for the VCs and Tech CEOs is somehow a ‘cleansing fire’.
There has been a transfer of money from naive people to the people pushing the AI Bubble. Nothing ‘cleansing’ about that other than the cleansing of wallets of sheep.
Comparisons to 1999 and 2008
The article compares 2025 AI Bubble to the Crashes of 1999 and 2008
Firstly, 1999 burned through not just dot com exuberance, it also burned through a lot of naive people’s life savings.
The survivors (Google, Amazon, eBay, Paypal) are hardly the standard for what a good, productive company should be. Unless you measure a company purely by profits and don’t factor in the effect on people and society.
Secondly, claiming 2008 was somehow related to social and mobile companies is absurd. 2008 was all about Wall Street’s bad bets. Bad Bets which have still not been closed out. That’s why we still have Tesla in a permanent short squeeze and many of the 2008 Swaps still being rolled and kicked down the road.
The survivors of 2008 (Facebook, Uber, AirBnbn, offspring of YCombinator) are an even worse example of what companies should be. Especially in terms of affect on society.
What does it say when most countries around the world are banning social media for children and teenagers under 15. The article seems detached from the reality that every day people who are sick and tired of companies like Facebook/Meta.
Wrongly claiming the Wall Street Crisis of 2008 was somehow a technology related cleansing wildfire is hilarious.
Equally amusing is claiming that this ‘cleansing wildfire’ of 2028 was somehow ‘worth it’ because it gave us abominations such as Facebook/Meta and Uber.
The Overgrown Forest
This is actually a well written section that also manages to be accurate. Agree with all of this. Except the last claim that in this kind of forest a fire is a correction.
In this kind of forest, a fire will burn through all the money invested.
It would also lead to a 20% to 50% US stock market crash. That would wipe out many non AI companies. That would wipe out 50% to 100% of many investors’ portfolios.
That is not a correction. That would be the biggest crash since 1929 and lead to an absolutely terrible Depression. One that might match or even exceed The Great Depression.
The Flammable Brush
The author refers to startups that will not survive the crash of an AI Bubble as ‘flammable brush’.
When the flammable brush burns it does not release resources back into the soil for harder species to absorb, as the article claims. The capital is all gone.
Furthermore, there will be very few companies that survive. The vast majority of ‘AI engineers’ will not have new jobs. At most 15% or 20% of AI talent from failed companies will find new jobs. The rest will have to find jobs outside of AI.
The Fire Retardant Giants
At this point, they are just trying to push the Forest Fire analogy too far.
Reality is
- Because their stock price has been pushed so far
- Because they have made such large investments into AI infrastructure
- Because they are propping up the US stock market
None of the large tech companies (Apple, Microsoft, Nvidia, Google, Amazon) can afford the AI Bubble bursting
- Firstly, stock price falls will greatly affect these companies’ reputation with investors
- Secondly, their large investments in AI infrastructure will be undone
- Let’s not forget the opportunity cost of investing hundreds of billions of dollars into AI infrastructure when no ‘Killer App’ for AI exists (yet)
- We also don’t know whether -> When/If there is finally a ‘Killer App’ for AI, it will use the same generations of AI Chips that these companies are currently buying
- The Killer App of AI just needs to be a few years in the future and all the current AI chips will be too ancient to work with it
- Thirdly, if these large tech companies crash, the US stock market will see a massive crash
- That in turn will greatly affect US consumers and US companies.
- It will burn companies and consumers around the whole world
- The customer base for the large US tech companies will be severely impacted as they will have far less disposable income
There is no such thing as ‘Fire Retardant Giants’ when Open AI with $20 billion a year in revenue has promised $1.4 trillion over the next 8 years.
These large tech companies have made a very big bet that OpenAI and Anthropic and other AI startups will succeed to an absurd extent.
They have made an even bigger bet that AI will become the center of the Universe.
The Large Tech Companies might not die out. However, they will lose 5 to 10 years worth of opportunity cost in terms of lost resources and lost time if AI does not become The Next Big Technological Revolution.
The Resprouters
Will some AI companies grow back after dying?
Yes, it is conceivable. The ones that have raised billions and are not burning through these billions might.
The failure is not wasted. Only for the survivors.
The Fire Followers
This might be the only fully accurate part of this beautifully written Spin masterpiece.
Once the AI Bubble bursts, we would have very interesting conditions
- The large tech companies would have to deal with lost opportunity cost, lost money, lost time
- It would take them time to re-focus on real markets
- In addition to the 5 to 10 years lost by throwing everything at AI
- They might lose another 2 to 5 years chasing the actual big new areas
- With the added cost that they might not be able to catch up, ever
- The AI big guns would be either wiped out, or in severe withdrawal
- Most of the AI startups would be wiped out
- A few would be in survival mode
- The rest would be pivoting to non AI uses
- Almost everyone who is fully focused on AI would need years or decades to build another business, whether in AI or not
That means that founders who start after the crash, and companies that never focused on AI and were instead focused on non Bubble industries, would have massive advantages over the current AI acolytes and the current AI faithful.
Claiming 2008 was about Silicon Valley is just absurd
This is a beautifully written article.
Not sure why we need spin doctors to defend the AI companies and the large tech companies who went all-in on AI to boost their market caps and their personal fortunes
Still, the article is almost a Spin masterpiece.
One of the main things that holds it back is -> Taking The Great Financial Crisis and somehow claiming it had to do with Silicon Valley. That is just absurd. That was a Wall Street crisis and did not have any strong connections to the 1999 Dot Com crash and does not have any strong connections to the the current AI Bubble.
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