Last week the debate was whether the AI industry was about to slow down. Anthropic’s Dario Amodei called for the industry to pace itself for safety reasons, semis sold off, the Journal ran a piece on whether an AI slowdown would break the market, and everyone with a microphone weighed in on the data-center bubble. Steve Rosenbush at the WSJ CIO Journal quoted me on the frontier-lag question that same week: “Most of them are not using the end of the frontier. A version from two years ago would be perfectly fine. There are audiences that barely can prompt. So a delay wouldn’t make a big difference.” I made the broader case in Bubble Talk Is How You Spot Someone Who Missed AI that the US buildout is a business, not a bubble. That argument was correct then and correct now. It was also the wrong debate.
The bubble nobody is looking at has more legs than the one everyone is arguing about. It is the SaaS debt trap. When their multiples collapsed, the SaaS incumbents took on record debt, bought back their own stock, and dressed the whole thing up as an AI strategy. Salesforce ran the most extreme version. HubSpot, Workday, ServiceNow, and Adobe ran variations. The bounce worked once. The endpoint is a debt-driven death loop that ends in a Bending Spoons offer letter. I made a prediction of a bounce in valuations in June, when I wrote The Last Great Head Fake in Software History, but this is not what I was expecting.
