🔮 Everyone’s looking for a bubble. No one sees the stampede.

Five months ago, we offered the only evidence-based framework to answer the question that was taking way too much space: is AI a bubble? To get to the bottom of it through evidence rather than vibes, we tracked the five areas we believe are crucial to understand the AI investment cycle. Our indicators are: economic strain,1 industry strain,2 revenue momentum,3 valuation heat,4 and funding quality.5

Our analysis at the time – contrary to many alarmists – concluded that generative AI is a boom, not a bubble. But at the core of our approach is evidence. If evidence changes, we change our minds.

The Financial Times has published over a hundred articles invoking the “AI bubble.” , the famed hedge fund investor, disclosed shorts on Nvidia and Palantir, hardening his view earlier this year: “almost all AI companies will go bankrupt, and much of the AI spending will be written off.”

Fund managers surveyed by Bank of America cite AI overexposure as their top tail risk. In my discussions with people representing hundreds of billions of dollars of capital, there was some nervousness. It tended to be more nuanced than mainstream journalism portrayed – a concern of low-quality data center projects being built and funded on spec, without the guarantee of a blue-chip Big Tech tenant.

The strongest version of the bear case goes like this: capex is growing faster than revenue, model costs are falling (the DeepSeek moment proved dramatic efficiency gains are possible), and most enterprise AI is still chatbot-level stuff. In other words, enterprises aren’t getting results, efficiencies mean you’ll need less infrastructure and that capex overhang will just collapse.

But while the bubble narrative gained momentum, reality has moved the other way. And the evidence now points not just to a boom, but to something the bears haven’t considered: scarcity. The real risk isn’t that we’ve invested too much in AI. It’s that we haven’t invested nearly enough.

Today I want to close the bubble question, for now, and show why the markets should be bracing for a stampede.

The growth phase

The ratio of investment to revenue – what we call Industry Strain – has dropped from 6.1x to 4.7x in five months since we published our analysis. If Industry Strain remains high for sustained