The coming AI bubble

I keep hearing people say that the rise of artificial intelligence (AI) will change everything. And I agree. But I also think something else is happening in plain sight, something a lot of people don’t want to admit. We are building up to another bubble. An AI bubble. The kind that looks powerful and unstoppable at first, but sooner or later, winds up bursting.

We have seen this play before. I remember how people talked in the late 1990s. The internet was new, exciting, and full of promise. Every pitch sounded like the next big thing. Investors poured money into any startup that had “.com” in its name even if the business barely existed. Some founders didn’t even have a clear plan to earn money. They only needed a story that felt futuristic. It worked for a while, until reality stepped in. When the dotcom bubble collapsed, it wiped out companies and investments almost overnight. But the internet itself did not die. It continued growing and later became even more important. What failed was not the technology. It was the hype that pushed it too far and too fast.

Today, the same pattern is unfolding with AI. There’s so much excitement around tools that can write, talk, code, analyze, and even create art. Many people assume AI will solve every problem you can throw at it. Money is flooding in. Predictions of trillion-dollar gains appear in the news every day. New companies show up like mushrooms after rain. Some of them have solid products. Others hope that investors won’t notice their lack of real demand, as long as they use the right buzzwords.

The normal rules of business still apply, though. At some point, AI companies must show proof that people are willing to pay for their products and not just try them once out of curiosity. Some AI services are already losing money at a shocking rate because running large models consumes huge computing power. When revenue fails to catch up, the investors who were once cheering loudly start asking difficult questions. That’s when the air leaks out.

For businesses, the danger lies in getting carried away. Companies chase AI for the sake of saying they use AI. They buy systems they don’t need. They replace workflows even when the old ones remain more reliable. Others bet their entire strategy on something that no one has tested in real-world conditions. In the dotcom era, firms poured millions into fancy websites that delivered no results. They wanted to look modern. Today’s version is signing up for expensive AI tools and hoping they magically improve productivity without real planning.

Still, businesses that stay grounded can win big. In the long run, AI will be like the internet: not a trend, but a utility. The firms that build strong data foundations, focus on customer needs, and train their people to use AI properly will come out stronger once the hype settles. Those who buy into every promise may end up cleaning up the mess later.

Consumers face a different kind of risk. AI offers convenience like never before. It writes documents, gives advice, helps students study, and even suggests what to buy. But the more we depend on it, the more we accept answers without questioning how they were made. AI can make mistakes. It can invent facts. It can reflect biases hidden in its training data. If people forget to think for themselves, we may lose more than we gain. And once the bubble pops, users could be stuck with tools that no longer operate as promised or that suddenly cost much more than before.

This also affects jobs. Some fear mass layoffs. Others expect new jobs to appear. Reality will fall somewhere in between. When the dotcom bubble burst, workers in unstable companies suffered. But later, digital jobs flourished. With AI, jobs will shift rather than simply disappear. People who learn how to work with AI will find chances to grow. Those who ignore the changes may feel left behind.

Now, consider the Philippines. Many Filipino workers depend on the business process outsourcing industry. Customer service, transcription, and basic back-office tasks are now being automated. Some leaders claim AI will replace entire outsourcing operations. But that’s the bubble talking. Companies still value the Filipino ability to communicate clearly and understand customer emotions. What will change is the type of work outsourced here. Higher-value services, analytics, quality control, and roles that require judgment are more protected. We need to upgrade skills fast or risk losing ground. Government and business must invest in digital education, because once the AI bubble bursts, the world will move on to more mature uses of the technology. The Philippines should be ready for that shift rather than watch from the sidelines.

There’s also a growing number of local AI startups. Many of them hold real promise. Some new tech firms in the country seem to chase the same excitement we once saw in Silicon Valley. Big claims, big valuations, but not always a working business underneath. If they fall apart when the hype fades, the damage won’t just hit founders. It could scare off people who might fund real breakthroughs later, right when Philippine innovation is starting to take shape. We need investors who ask tough questions and insist on results, not just a flashy pitch deck.

We shouldn’t be scared of AI. In fact, I’m excited by what it can do. But I’ve learned not to trust hype. A bubble forming around a powerful idea doesn’t make the idea wrong. It only means people are expecting too much, too quickly. When the dotcom bubble burst, it cleaned out the noise and forced tech companies to grow up. I think AI will go through the same cycle. The real innovation will come after the excitement cools down. We can move forward with clear eyes. Think before we spend. Train people for the new jobs coming. And remember that once the excitement settles, the tools we’re amazed by now will simply be part of normal life. The bubble will pop, but what remains after could truly change how we live and work.

The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX.

Reynaldo C. Lugtu, Jr. is the founder and CEO of Hungry Workhorse, a digital, culture, and customer experience transformation consulting firm. He is a fellow at the US-based Institute for Digital Transformation. He teaches strategic management and digital transformation in the MBA Program of De La Salle University. The author may be e-mailed at rey.lugtu@hungryworkhorse.com