On this episode I breakdown whether we’re experiencing an AI bubble by examining arguments on both sides. I discuss how AI startups are receiving unprecedented funding despite potential economic weaknesses, while also acknowledging the genuine utility and adoption of AI technologies. I also share practical advice for founders navigating this landscape, emphasizing that fundamentals like user engagement and profitable pricing remain essential regardless of market conditions.
Timestamps:
00:00 – Intro
00:33 – Yes it’s a bubble
07:06 – No it’s not a bubble
10:31 How to play the AI Wave
14:26 – What happens in a bubble
15:07 – The benefits of a bubble
Key Points:
• The case for an AI bubble includes excessive hype around startups, inflated valuations (seed rounds of $20-30M), similar base models across companies, and questionable unit economics
• Arguments against a bubble include demonstrable utility in workflows, falling training and inference costs, increasing adoption rates, and development of new competitive moats
• Different strategies are recommended for founders depending on whether they believe it’s a bubble or not
• Historical patterns show that even in bubbles, truly valuable companies emerge and thrive long-term
1) The "Yes, It’s a Bubble" Case
Cinematic demo videos everywhere ($100k+ productions)
Marketing trumping actual product quality
Insane valuations ($20-30M seed rounds becoming normal)
$5-10M seed rounds are now common
Many startups using the same base models
Shaky unit economics across the AI stack
The math doesn’t add up: Users pay $200, app pays OpenAI $500, OpenAI pays AWS $1000, AWS pays Nvidia $10,000.
Only thing propping it up? VC funding.
2) The "No, It’s Not a Bubble" Case
Real utility: AI is genuinely saving people hours of time
Revenue-facing workflows being implemented daily
Costs are falling (training + inference getting cheaper)
Open source pressure driving costs down
Massive adoption (ChatGPT: 700M+ active users)
Multi-year enterprise deals being signed
New moats forming (proprietary data loops)
Durable infrastructure investments (chips, data centers)
3) What This Means If It IS a Bubble
Focus on cashflow for services
Don’t count on your equity being worth millions
Make small, diversified bets
Consider raising VC now (while you still can)
Build sustainable, profitable businesses
4) What This Means If It’s NOT a Bubble
Distribution matters more than tech
Focus on your ideal customers
Play the long game
Own the data, not the models
Expand and incubate multiple projects
5) What’s Always True, Bubble or Not
Talk to users weekly
Price for profit early
Focus on retention over trials
There’s always a CAC arbitrage opportunity somewhere
Remember: Even in bubbles, real value emerges.
The dot-com bubble gave us Amazon.
This AI wave will produce trillion-dollar companies too.
Notable Quotes:
"Even in the dot com era… Amazon came out of the dot com era, which is like a trillion dollar company. There’s going to be, if it is a bubble, there’s still going to be a trillion dollar company that comes out of this era."
The #1 tool to find startup ideas/trends – https://www.ideabrowser.com/
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Boringmarketing – Vibe Marketing for Companies: http://boringmarketing.com/
The Vibe Marketer – Join the Community and Learn: http://thevibemarketer.com/
Startup Empire – a membership for builders who want to build cash-flowing businesses https://www.skool.com/startupempire/about
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