Like the dot-com era, many overvalued AI startups will fail. However, this is distinct from the underlying technology. Artificial intelligence itself is a fundamental, irreversible shift that will permanently change the world, similar to how the internet and social media became globally dominant despite early market bubbles.

After years of inflated promises, the market is moving past the initial AI hype cycle. Leaders realize that simply attaching "AI" to a company name is not a strategy. This shift leads to a more realistic understanding of where AI provides practical value, which will stabilize hiring and investment.

The current AI boom mirrors the dot-com era. The underlying technology is revolutionary and will transform the economy, but valuations may have already priced in decades of future growth. This means investors buying now risk poor returns even if the companies ultimately succeed, as both technology enthusiasts and valuation skeptics can be correct simultaneously.

The stock market's enthusiasm for AI has created valuations based on future potential, not current reality. The average company using AI-powered products isn't yet seeing significant revenue generation or value, signaling a potential market correction.

Historical technology cycles suggest that the AI sector will almost certainly face a 'trough of disillusionment.' This occurs when massive capital expenditure fails to produce satisfactory short-term returns or adoption rates, leading to a market correction. The expert would be 'shocked' if this cycle avoided it.

The initial euphoria around AI is giving way to skepticism. A recent MIT study shows 95% of CFOs aren't seeing expected returns, and the business world is experiencing a collective 'eye roll' at the hype. This suggests the market may be entering a period of disillusionment.

Just as companies scrambled for a "web strategy" and then a "mobile app," they now chase an "AI strategy." History shows this frenzy will subside, and AI will become an integrated tool. The fundamental job remains: build valuable products customers will pay for.

Despite the hype, firms like Uber and Microsoft are scaling back AI use because operational costs are proving higher than the human labor they were intended to replace. The expected ROI isn't materializing for many, leading to what feels like a 1999-style tech bubble where companies are reconsidering their massive AI investments.

The current AI hype is fueled by massive corporate spending on LLMs and chips. The entire bubble is at risk of unwinding when a critical mass of these companies reports that they are not achieving the promised ROI, causing a rapid pullback in investment.