The annoying thing about bubbles is that – in the moment – there is no way of knowing for sure that you’re in a bubble.
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Or more accurately, knowing which phase of the bubble you’re in…
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(A classic case of being inside the bottle and not being able to read the label…)
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Last week, I wrote a piece titled: [#068] Why Your $20/month AI tool is about to cost $500…
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And it created quite an uproar.
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Many expressed appreciation for the heads up…
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Some dismissed the possibility entirely…
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And one reader was outraged – accusing the piece as clickbait.
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(All of these reactions represent the expected range of reactions – from delusion to denial – while in the middle of a bubble, by the way…)
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But here’s the thing:
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Whether you agree or disagree with the possibility of a major price hike in generative AI to support the cost structure of the technology.
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One of my objectives with The Digital Contrarian newsletter is to offer an informed, contrarian perspective that makes you think.
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To help you spot non-obvious trends, patterns, and forces that others may be completely missing.
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To see hidden opportunities…
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To be aware of risks lurking in the shadows…
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And most importantly:
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To connect dots in a way that helps you make better decisions that impact the future of your business – and your life.
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(Something private clients pay me to serve in that role, as their Strategic Advisor…)
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And to that end…
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I believe a question we should all be thinking about right now is this:
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Where on the “AI Bubble Curve” in that image above are we at right now at this moment??
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And more importantly…
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How should we be preparing for what’s to come?
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Well, first things first…
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Let’s look at some of the latest evidence suggesting that we may be closer to the top than some think…
1 | The Late-Stage Bubble Argument.
On the one hand…
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One could argue that the evidence suggesting we’re approaching the “top” of the AI bubble is already quite significant (and growing…)
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From the now near identical curves of the Nasdaq during the dot-com bubble (1998–2001) vs. the Nasdaq today (2023–2025, driven by AI hype), first shared by Spencer Hakimian of Tolou Capital:
To the “Circular AI Money Shell Game” taking place over the last few weeks (see the diagram below first reported by Bloomberg) – and how similar forms of extreme financial engineering have been a “last gasp” move at the center of each of the most recent financial bubbles.
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(Think: Collateralized debt obligations in 2006-07 leading to the 2008 housing market crash, and the subsequent Global Financial Crisis.)
And this evidence is just the tip of the iceberg…
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For example:
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For the first time ever…
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US Census Bureau data (1.2M firms surveyed) shows enterprise AI adoption has fallen – from 14% to 12% between June and August 2025.
As Stephen Klein recently wrote:
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“This has never happened with any technology in early adoption. Not electricity. Not the internet. Not mobile phones.”
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And just this past week…
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We’ve seen evidence that usage of “AI Vibe Coding” tools are now also on the decline…
As Barclays analysts have reported:
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Lovable hit $100 million in annual recurring revenue in June. But since then, traffic has dropped 40%.
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Vercel’s v0 got hit even harder – visits are down 64% since May.
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Bolt . new is down 27% since June.
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Even Replit, one of the stronger players, has seen traffic slip.
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(Google Trends data backs this up.)
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And BTW –Â this is all in addition to some of the data we’ve explored in recent past issues of The Digital Contrarian over the last several weeks:
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- From [Issue #062] – MIT/McKinsey Data: 95% of GenAI pilots are failing to deliver measurable ROI at the enterprise level.
- From [Issue #068] OpenAI is projected to lose $83 million per day between now and 2029 with no clear profitable revenue model.
So again…
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One could argue that the evidence that we may be approaching the “top” of the AI bubble is already quite significant.
2 | The Anti-Bubble Argument.
But on the other hand…
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An argument can be made that the louder the bubble talk gets, the less and less likely we’ve reached “delusion” peak stage before the crash…
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(After all, as we explored in [Issue #039] Right Thesis, Wrong Timing?, Alan Greenspan made his famous “Irrational Exuberance” speech predicting a dot-com bubble in 1995, nearly 5 years before the eventual crash…)
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So perhaps there is still a long long way to go…
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Remember, the annoying thing about bubbles is that you can never know for sure when you’re inside of one.
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Or know which phase of the bubble you’re in…
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Hindsight is 20/20.
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And there are always telltale signs in retrospect.
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But in the moment, it’s impossible to know for sure…
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So, if that’s the case…
3 | What Do We Do About It All Based On Where We Are At This Moment?
First, I think it’s important to note that bubbles aren’t inherently bad.
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In fact, bubbles are a necessary element in the process of bringing forth any form of world-changing technology to humanity.
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(We experienced this with Railways in the 1870’s, Telecom in the 2000’s, Shale in the 2010’s, and now with GenAI in the 2020’s.)
BTW – If you’re interested in going deeper on this topic, Derek Thompson of The Atlantic wrote an excellent piece on his Substack titled “This is How the AI Bubble Will Pop” – based on an interview he conducted with Dr. Paul Kedrosky, a notable venture capitalist and fellow at MIT’s Institute for the Digital Economy.
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And I think that once we appreciate that bubbles are a necessary part of every new technology cycle…
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They’re somehow less scary.
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Second, I think it’s also important to acknowledge that this bubble brings with it unprecedented levels of volatility that we should take into account.
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Like for example, take two companies: AMD and Reddit.
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In the last week, AMD’s market value increased by 35%, based entirely on the news of a partnership deal with OpenAI.
At the same time, Reddit’s market cap dropped by nearly 22% over nearly the same period.
What’s the story with Reddit?
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Well, check out this chart below:
ChatGPT made a single change (due in part to a Google algo change) that reduced the % of Reddit citations showing up ChatGPT by 86%.
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The result?
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A massive selloff of Reddit’s stock, wiping out $8 Billion in market value practically overnight.
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These are MASSIVE swings.
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Massive swings UP.
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Massive swings DOWN.
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And when we experience (or hear about) massive swings like this…
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We can feel unstable…
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We can feel ungrounded…
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Like the world as we know it is shifting beneath our feet…
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(And in some ways, it is.)
* * *
In moments like this, I remind myself:
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Be Curious. Ask Questions. Seek Truth.
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Because curiosity is calming.
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(When you’re curious, your brain shifts away from negative emotions, threats, and anxiety to learning and growth. The neuroscience behind this is incredibly compelling.)
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Questions bring clarity.
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(After all, the entire ASK Method is built on this premise. Change your questions, change your life.)
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And last but not least…
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The faster you get to the truth.
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The faster you get to the cash.
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Like for example, going back to the very beginning of our conversation…
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Maybe OpenAI *is* going to increase prices by 25x to cover their costs…
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OR…
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Maybe they’re going to release an Ad-supported version of ChatGPT…
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And maybe this is going to be one of the biggest digital marketing opportunities since Meta launched Facebook Ads way back in 2007…
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There are recent clues that suggest this might be coming sooner than we think…
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Okay, I’ll leave you with that for now…
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Have a great rest of your weekend…
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Remember to hug the ones you love…
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And until next week…
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Ryan :-)
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Okay, I’ll leave you with that for now.
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Have a great week, and more to come soon!
