Artificial intelligence has been the sun around which the startup and tech world revolve since the launch of Chat GPT. To give you some context, in the Forbes’ Next Billion-Dollar Startups 2024 list, AI is mentioned in 13 out of the 25 startups on the list.
At the same time, while reading bout AI online it feels as if it is losing its initial momentum, which leads commentators like us to believe that 2025 will be a year of market correction and consolidation for AI.
Thinking about hype and disillusionment trends it’s hard not to draw analogies with the the dot-com bubble of the late 1990s and early 2000s. Technological revolutions often motivate periods marked by irrational investments, overhyped promises, and a disconnect between market expectations and technological realities. Yet, despite the initial boom and burst, it’s hard to overestimate the actual long-term impact of the internet on the global economy from the vantage point of 25 years.
“People overestimate what they can do in one year and underestimate what they can do in 10 years.” – Bill Gates
Consequently, it might turn out that 2025 is the year in which the long-term impact of AI is underestimated by the market, which in turn provides different challenges and opportunities for startups and investors in the field.
1. Burst Bubbles And Market Realignments
The dot-com bubble burst in 2000 when the inflated valuations became unsustainable. Tech-heavy indices like the Nasdaq Composite fell by nearly 80%, wiping out trillions of dollars in market value. High-profile failures such as Pets.com and Webvan became cautionary tales of investor exuberance.
As with the internet in the early 2000s, the hype might give way to a phase of rationalization, where only the most resilient and innovative players survive. With a falling faith among investors, AI businesses that have not reached a sustainable business model might be forced to shut down (which in reality are likely to be a large percentage of the smaller AI startups).
Yet, the technology is only likely to continue its rapid development within the tech giants that can foot the RND bill or the startups that have managed to find a sustainable business model.
2. The Internet As A Blueprint
Companies like Amazon, Google, and eBay, which emerged from the ashes of the dot-com bubble, reshaped entire industries and delivered massive economic value. The infrastructure built during the dot-com era – fiber optics, data centers, and protocols, laid the groundwork for the internet economy we know today.
AI’s trajectory may follow a similar path. While speculative investments might overshadow near-term practical applications, the technology has the potential to become foundational. AI applications in healthcare, logistics, education, and customer service are already demonstrating market feasibility.
3. Innovation Through Iteration
One key similarity between the AI hype and the dot-com bubble is that both periods have fueled rapid experimentation. The dot-com era gave rise to ideas like online marketplaces and digital advertising, which evolved into essential business models. Similarly, the AI boom is driving advancements in areas like natural language processing, computer vision, robotics, etc.
Some AI applications may seem like novelties today, but their underlying technologies—like transformer models or generative adversarial networks (GANs) are likely to power future breakthroughs. For instance, AI’s ability to analyze large datasets could lead to major advancements in drug discovery, energy optimization, and personalized education, mirroring how early search engines eventually evolved into the backbone of today’s knowledge economy.
In that sense, the successful AI businesses and business models of the future might not be the things that are obviously visible today. This, however, doesn’t undermine the importance of current business and technological experiments in the field – on the contrary, they are part of a chain of constant iteration and economic evolution by natural selection.
In that sense, bearing in mind that timing is one of the most important factors for startup success, it’s important to analyze the current market sentiment regarding AI. 2025 would likely be a harder period to secure funding for your AI startup. Yet, this shouldn’t make you too skeptical about the field as a whole. The big winners will likely be the projects that are managed prudently and patiently in order to survive the market volatility and ride the long-term positive trend.
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