The AI boom is real, but the financial structure built around it appears to be expanding more quickly than we believe any credible adoption curve can justify. This is not a new phenomenon. Across every major technological revolution – railroads, electrification, radio, fibre optics, and the dot‑com era – the technology itself has endured, but the financing cycle has broken, with expectations outpacing the industry’s ability to meet them. It increasingly appears to us a question of when, not if, the AI bubble bursts.
This paper seeks to clarify the mechanics of the AI cycle at year-end 2025: the recursive demand loops, off‑balance‑sheet leverage, distorted demand signals, and the most likely paths of unwinding. While we believe wholeheartedly in the transformative power of this technology, we also know markets and their propensity for overreach.
