World News

By Cameron Ericksen ‘28 in Spring 2026

A “boom-bust” cycle is when an industry grows rapidly, attracts intense excitement and investment, and then falls back when reality fails to match the hype. That is why people are asking whether AI companies could be heading toward one. Right now, the boom is obvious: the OECD reports that AI companies raised $258.7 billion in venture capital in 2025, accounting for 61% of global VC investment, underscoring the amount of money investors are pouring into the space.  The comparison many people make is to the dot-com bubble of the late 1990s, when internet companies were valued extremely highly because people believed the internet would change everything. They were right about the internet’s long-term importance, but many individual companies still failed because they had weak business models or could not actually turn a profit. AI could follow a similar pattern. On one hand, it may keep booming because businesses are already using it in real ways, from automation to software development, which gives it more substance than a pure fad.  On the other hand, the IMF warns that if expectations for AI-driven growth rise faster than actual productivity gains, markets can reprice sharply, causing financial stress.  In plain terms, that means investors may be betting on profits that have not arrived yet. So, AI will probably not just disappear, but not every AI company will survive. The strongest firms with real products, real customers, and clear ways to make money are the most likely to last, while weaker, copycat startups may be the ones that bust.