The AI bubble, from someone who runs on the last one's leftovers

This week, three of the most valuable private companies in history are going public, one after the other. SpaceX is listing at close to a 1.8 trillion dollar valuation, the biggest IPO there has ever been. And in the days around it, the two biggest names in AI, OpenAI and Anthropic, have both filed to do the same.

So everyone is asking the obvious question. Is this an AI bubble?

Yeah. I think it is.

But that is not the question keeping me up at night, and I do not think it is the one that matters most if you actually run a business. I am not watching this from the cheap seats. I run three companies, around 140 people between them, and every one of those teams now leans on AI. Software, marketing, finance, sales, all of it. I am pushing them to use it more, not less. So I am not some sceptic on the sidelines. I am about as deep in this water as you can get.

Which is exactly why the question I keep coming back to is a different one: how much of my business now depends on these AI companies? And what happens if one of them has a wobble, or just decides to charge me ten times more?

I have a particular reason for seeing it this way. I have spent my career in the one industry that actually caused the last great tech crash. So when I look at AI, I am not really looking at the share prices. I am looking at the layer underneath, and who controls it.

The part of the dot-com crash people forget

Go back to the year 2000. Most people remember the dot-com bubble as a load of silly websites with sock-puppet adverts crashing to zero. That is the cartoon version. It is not really what happened.

The real story was underneath the websites. It was the wiring.

By the late nineties the whole world had decided the internet was going to be enormous. And if it was going to be enormous, it had to be connected up, and back then that meant cable. Tonnes of it. In the ground, under the sea, everywhere. So the companies building that connectivity borrowed billions and started laying fibre as fast as they physically could. At the peak we were putting something like 180,000 kilometres of fibre into the ground every single day around the world. That is roughly four loops around the planet, daily.

They built the road before anyone owned a car. And the cars took about seven years to turn up.

So most of that cable just sat there. In telecoms we have a name for it: dark fibre. Cable that has been laid and paid for, but is not carrying anything. At one point only around 3 per cent of the fibre in the ground in America was actually lit. Three per cent. The other 97 sat in the dark.

Then someone had to pay for it. Most of the companies that borrowed all that money went bust, and not quietly. WorldCom and Global Crossing produced two of the biggest bankruptcies the United States had ever seen. And when it came down, it did not only take the cable companies with it. It hurt everyone who had built a business on top of the internet.

Here is the part that actually matters, though. The people who made the real money came later. They walked in afterwards and bought all that cable for pennies. One undersea network that cost about 3.5 billion dollars to build was later sold for 130 million. And on top of that cheap, salvaged wiring, people built the internet we use today. YouTube, Netflix, Google, all of it runs on infrastructure that was bought out of a wreck.

This is my arena. We run our own network at circle.cloud, the telecoms company I built, bootstrapped, to over a hundred people. That infrastructure is the thing that made the business possible. The wiring never disappeared. It got reused. The technology was real the whole time, and we did need it. Eventually.

It just got built too early. On too much borrowed money. On too much hype.

Swap the fibre for GPUs

So when I look at AI now, that is the layer I am thinking about. Because if you swap the fibre optic cable for GPUs, the similarities are hard to miss.

This year alone, the big tech companies are pouring something like 700 billion dollars into AI data centres and chips. Amazon is putting in around 200 billion. Then Microsoft, then Google, then Meta, each building it out as fast as they physically can. It is the same belief as last time: we are going to need a never-ending amount of compute.

And maybe we will. Eventually. But almost certainly not as fast as they are building for. Every big technology gets ahead of itself like this. The internet looked unstoppable in 1999, and it still took about twenty years, until smartphones and social media and cloud software all arrived, before it really paid off. I think AI is the same. The demand will come. Just not at the speed they are betting on.

Forget the data centres for a second, though, because the part that actually touches you and me is the companies we plug our businesses into. And most of them are losing money. Not investing-for-growth money. They are haemorrhaging cash.

xAI, Elon's AI company that is now part of SpaceX, was reported to be burning through about a billion dollars a month last year. OpenAI, by its own projections, is on track to lose something like 14 billion dollars this year. Anthropic is the only one anywhere near profit, and even that is a forecast for a single quarter, which it has already told investors it does not expect to last.

So here is a question I cannot stop turning over: why go public now? Private money has been flowing to these companies like there is no tomorrow for years. The answer, I think, is that they need more than the private markets can give them, and the biggest pot of money left is the public. People like you and me. Our index funds. Our pensions. And that last point is worth sitting with, because if you hold a normal index fund, you will end up owning a slice of these companies whether you decide to or not. The moment they are big enough, they get added, and your retirement money is along for the ride.

When a company that was happily private for years suddenly needs your money that badly, I think that tells you something about how solid it really is.

There is a man who says all of this far more loudly than I would. Ed Zitron, who writes the Better Offline newsletter and runs the podcast of the same name, has built a following pulling apart the finances of these AI companies. His view, flat out, is that they do not survive. Not a rough patch. They do not make it. He has even gone after Anthropic's one forecast profitable quarter and called the numbers massaged.

I think that goes too far. I use this stuff every day, and AI is not going anywhere, whoever I end up buying it from. But you do not have to buy the doom to feel the pain. Once these companies are public, we all get to see the real numbers. And I do not think we are going to like them.

The price you are paying for AI is not real

This is the bit that hits closest to home for anyone running a business on these tools.

The price you pay for AI today is not the real price. Yes, the cost per token keeps falling, that part is true. But they are still selling it to you for less than it costs them to run. Sam Altman has openly said OpenAI loses money even on its 200-dollar-a-month plan. Anthropic found people on its 200-dollar plan pulling a thousand dollars of usage in a single day, and had to bring in new limits just to slow them down.

So whatever you are paying for AI right now, it is a fraction of what it actually costs. The investors are quietly covering the rest. And here is the trap: even as the headline prices drop, your bill creeps up anyway, because you keep using more. I know we do.

One day the discount ends. The investors who have been covering the difference will want their money back, and that money lands on our bill. If your business only works while the tool is subsidised, you have not really got a business yet. You have got a discount.

So what do you actually do about it

I want to be straight with you here, because the internet is full of people who have made local AI their whole personality and want you to rip the cloud out. That is not me. I live in this stuff every day, and I am probably more dependent on it than you are. Tearing it all out would be daft.

What I am saying is simpler. Do not become a hostage. A CEO of an AI agency said it to me perfectly this week: I want a backup plan before I need one.

For me, that comes down to three things.

One, do not anchor your whole business to a single provider. Build it so you can switch. If one of them doubles its price or falls over, you want to be able to move to another without your business stopping.

Two, know what you are using and what it actually costs at the real, unsubsidised price. Because if the maths only works while someone else is paying half of it, you do not yet know whether you have a business.

Three, run it locally wherever you sensibly can. On your own kit. We have done this with Olatti, the communications platform we build at We UC, from day one. Every phone call that goes through it gets transcribed and summarised, and we do not ship that off to a frontier model. We run it on open-source models, on our own hardware, in one of our data centres.

I will be honest about why, because it was not some grand philosophical stand. It was money. Sending every call off to a big cloud model would cost a fortune, and customers expect that kind of feature included for free now. Local was the only way the numbers worked. But it turned out to be a brilliant hedge as well. We genuinely do not care what anyone charges for AI next year for that part of the product. It just keeps working. And there is a second reason a lot of people are going local that has nothing to do with cost: privacy. When you run it yourself, your data never leaves your own network.

There is a bigger picture under all of this, too. This entire build-out is a bet that the AI of the future lives in some giant data centre, miles away from you. I am not sure it does. I think more and more of it ends up running right here, on your phone, on your laptop, or in a little box in the corner of your office. That is more or less the bet Apple is making: do the everyday stuff on the device, and only send the hard stuff to the cloud. If that is right, then a chunk of this enormous data-centre build-out ends up exactly like that fibre did. Built for a demand that turned up later, and in a different shape.

I am not betting my whole company on local AI. But I do think it is coming, and I am going local wherever it makes sense.

Who actually wins

So let me bring it together.

This week SpaceX goes public, the biggest IPO in history, and the two biggest names in AI, both still losing money, have filed to follow. Whether this is the top or just the start, I genuinely do not know, and anyone who tells you they do is guessing.

But here is what I do know. Most of us have already built AI into our businesses, or we are in the middle of doing it. Which means we are building on top of these companies. And if one of them falls, it will not fall alone. It will drag down everyone built on top of it. People like us.

I am not trying to time the market. I just want to make sure that if the price goes up sharply, or one of these companies has a wobble, my businesses do not go down with it. That is why we run what we can ourselves. That is why I always keep a backup plan.

Because the technology always survives. The people who bet everything on owning it do not. The internet was real even when most of the cable sat switched off in the dark for years. AI is real even if this week's prices turn out to be mad.

So I am not trying to own the future of AI. I just want to still be standing when the bubble bursts, and build on whatever it leaves behind.

The video version of this is on YouTube now. Same argument, more of the receipts on screen: youtu.be/mQIxERciGOw.

If running a business through this kind of uncertainty is on your plate, I also write a free weekly newsletter about what is actually working inside my companies and what is quietly breaking. It is free, and you can get it here: axelmolist.com/ceo-os.

Got a different read on the bubble, or a story of your own about where AI is helping and where it is bleeding money on your team? Hit reply. I read every email.

Thanks, Axel.