Long Live The AI Tech Bubble
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Nearly half of all global startup funding this year has gone to AI startups. Many see that concentration as a warning sign and indication the market is distorted by hype. But in reality, this wave of AI investment is expanding the opportunity for founders and investors alike to lay the groundwork for new companies and industries to emerge around this transformative technology.
In the second quarter of 2025 alone, global venture funding reached $91 billion, with roughly $40 billion (about 45%) going to AI companies, led by record-setting rounds for OpenAI and Scale AI.
Sixteen companies captured a third of all global capital that quarter. By Q3, nearly half of all startup funding went to AI, and a third of that flowed to a single company. We are at a point when occasionally pre-seed-stage startups are unicorns, and valuations for growth stage go over 100x revenue, but largely this is the exception, not the rule.
The warning lights are flashing. However, this level of concentration and the occasional outlier are a signal that we’re in the early stages of a generational platform shift rather than at the end of a speculative bubble.
Infrastructure rounds seed an entire new economy
History has shown that when capital pools around a breakthrough technology, it rarely stays contained. Netscape’s IPO in the 1990s drew massive investment into the internet and unlocked an era of browsers, servers, software and infrastructure that became the backbone of the modern internet.
The same pattern is emerging today. Mega AI infrastructure rounds lay the technical foundation on which future platforms will build, which also sets off a wave of company formation across every layer of the stack. These companies will cover everything from model training and inference to data management.
As that base layer hardens, the wave of applied innovation that follows will be faster and more powerful than anything we’ve seen since the mobile and cloud tech booms.
We’re already seeing this take shape as entrepreneurs spin out of Anthropic, OpenAI and other leaders to launch startups in areas like legal automation, robotics and drug discovery. Operators who spent the past decade building SaaS or fintech are now reimagining those same sectors through an AI lens.
Investors who once avoided deep tech are developing new theses around it. The center of gravity may sit with a handful of large AI companies, but the opportunities radiating outward are multiplying across the entire ecosystem.
Real companies, real revenue, real ROI
Critics argue that too much capital in one sector creates fragility. And yes, valuations are elevated and investors are right to be discerning. But many of these AI-driven companies are already generating real revenue and delivering measurable ROI to customers.
Some of the companies in my portfolio are emblematic, such as:
- EliseAI is used by 28 of the top 30 multifamily owners and operators to automate up to 90% of their leasing maintenance and rent collection workflows, leading to reduced labor costs, increased conversion rates on leases, and lower rental delinquencies.
- Valence enables enterprises to provide personalized coaching to hundreds of thousands of employees, increasing productivity and retention.
- Exodigo uses multisensor hardware and AI to map what’s underground before major infrastructure projects break ground. Customers avoid costly utility strikes that cause more than $125 billion in damages each year. These companies are generating measurable and scalable ROI for customers.
These are not the hallmarks of an economic bubble where economic reality is ignored and often fueled by debt, but rather an equity-financed productivity boom with measurable economic impact. While there were booms and busts during the Industrial Revolution, the efficiency of using, say, a cotton gin over human labor isn’t erased. The compounding effects of this AI revolution on productivity could be orders of magnitude larger.
That’s why the current moment is not a zero-sum game. For every billion dollars going into a foundational model, thousands of startups are emerging to apply those advances in specific markets. As these applied startups grow, they drive productivity and create new data, infrastructure demand and entirely new categories. The feedback loop between infrastructure and application is what defines every major technology cycle.
For long-term investors, tech is your only friend
Tech as a percentage of GDP grew from 1%-2% about 50 years ago to 14% today. In 20-30 years, it could very well be 28%-50%. Tech as a percent of the S&P stands at 45%. In the future, that percent could be north of 70%, with much of the bulk of that value being created in the private sector.
Economists know that two things have driven economic growth over the past 200 years: (first) population growth and (second) new goods and services. With population growth flatlining, investors looking for growth will turn to new goods and services. And the bulk of those new goods and services? Tech.
Those that opted out of tech as too dangerous 20 years ago were hurt pretty badly. Just look at those that stuck to the European stock indexes. The next 20 years will be even more painful if one doesn’t have sufficient tech exposure. And private markets are a critical allocation given this new AI-driven productivity revolution.
Why this cycle will move faster and reward tech-heavy investors
We are also beginning to see why this cycle is so different from the SaaS era. The average SaaS company historically needed about seven years to reach $20 million in annual revenue.
Enterprise AI software companies are hitting that milestone in closer to two years. Many top performers are growing well above 200% annually, which is double the pace of last-generation software companies, and getting to profitability substantially faster. As long as AI companies continue driving real, measurable economic impact for their end users, this boom rests on fundamental value, not speculation.
The real winners of this cycle will be the builders who turn today’s massive infrastructure investments into the next generation of enduring companies. Investors who understand how to participate intelligently will be best positioned for what comes next.
The venture market isn’t shrinking around a few giants; it’s opening new frontiers at remarkable speed. There are many ways to play this wave as an investor. At Alpha Partners, we believe winning in this hyper-growth environment means co-investing in market leaders with strong fundamentals, a clear ROI for customers, a disciplined approach to valuation, and a focus on vertical application-layer businesses. There is substantial opportunity for investors and entrepreneurs that keep their heads down and focus on building great companies that add value to their customers, our economy and society.
Steve Brotman is the founder and managing partner of Alpha Partners, a growth-equity firm that co-invests in venture-backed companies by leveraging the unused pro-rata rights of more than 1,000 early-stage VC partners.
Related reading:
- Why This OpenAI And CoreWeave Investor Thinks The AI Market Is ‘Dangerously Overheated’
- The Great ‘AI Bubble’ Debate
Illustration: Dom Guzman
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Why AI’s Next Phase Belongs To Infrastructure
The Week’s 10 Biggest Funding Rounds: A Lot Of Really Big Deals
Long Live The AI Tech Bubble
Share:
Nearly half of all global startup funding this year has gone to AI startups. Many see that concentration as a warning sign and indication the market is distorted by hype. But in reality, this wave of AI investment is expanding the opportunity for founders and investors alike to lay the groundwork for new companies and industries to emerge around this transformative technology.
In the second quarter of 2025 alone, global venture funding reached $91 billion, with roughly $40 billion (about 45%) going to AI companies, led by record-setting rounds for OpenAI and Scale AI.
Sixteen companies captured a third of all global capital that quarter. By Q3, nearly half of all startup funding went to AI, and a third of that flowed to a single company. We are at a point when occasionally pre-seed-stage startups are unicorns, and valuations for growth stage go over 100x revenue, but largely this is the exception, not the rule.
The warning lights are flashing. However, this level of concentration and the occasional outlier are a signal that we’re in the early stages of a generational platform shift rather than at the end of a speculative bubble.
Infrastructure rounds seed an entire new economy
History has shown that when capital pools around a breakthrough technology, it rarely stays contained. Netscape’s IPO in the 1990s drew massive investment into the internet and unlocked an era of browsers, servers, software and infrastructure that became the backbone of the modern internet.
The same pattern is emerging today. Mega AI infrastructure rounds lay the technical foundation on which future platforms will build, which also sets off a wave of company formation across every layer of the stack. These companies will cover everything from model training and inference to data management.
As that base layer hardens, the wave of applied innovation that follows will be faster and more powerful than anything we’ve seen since the mobile and cloud tech booms.
We’re already seeing this take shape as entrepreneurs spin out of Anthropic, OpenAI and other leaders to launch startups in areas like legal automation, robotics and drug discovery. Operators who spent the past decade building SaaS or fintech are now reimagining those same sectors through an AI lens.
Investors who once avoided deep tech are developing new theses around it. The center of gravity may sit with a handful of large AI companies, but the opportunities radiating outward are multiplying across the entire ecosystem.
Real companies, real revenue, real ROI
Critics argue that too much capital in one sector creates fragility. And yes, valuations are elevated and investors are right to be discerning. But many of these AI-driven companies are already generating real revenue and delivering measurable ROI to customers.
Some of the companies in my portfolio are emblematic, such as:
- EliseAI is used by 28 of the top 30 multifamily owners and operators to automate up to 90% of their leasing maintenance and rent collection workflows, leading to reduced labor costs, increased conversion rates on leases, and lower rental delinquencies.
- Valence enables enterprises to provide personalized coaching to hundreds of thousands of employees, increasing productivity and retention.
- Exodigo uses multisensor hardware and AI to map what’s underground before major infrastructure projects break ground. Customers avoid costly utility strikes that cause more than $125 billion in damages each year. These companies are generating measurable and scalable ROI for customers.
These are not the hallmarks of an economic bubble where economic reality is ignored and often fueled by debt, but rather an equity-financed productivity boom with measurable economic impact. While there were booms and busts during the Industrial Revolution, the efficiency of using, say, a cotton gin over human labor isn’t erased. The compounding effects of this AI revolution on productivity could be orders of magnitude larger.
That’s why the current moment is not a zero-sum game. For every billion dollars going into a foundational model, thousands of startups are emerging to apply those advances in specific markets. As these applied startups grow, they drive productivity and create new data, infrastructure demand and entirely new categories. The feedback loop between infrastructure and application is what defines every major technology cycle.
For long-term investors, tech is your only friend
Tech as a percentage of GDP grew from 1%-2% about 50 years ago to 14% today. In 20-30 years, it could very well be 28%-50%. Tech as a percent of the S&P stands at 45%. In the future, that percent could be north of 70%, with much of the bulk of that value being created in the private sector.
Economists know that two things have driven economic growth over the past 200 years: (first) population growth and (second) new goods and services. With population growth flatlining, investors looking for growth will turn to new goods and services. And the bulk of those new goods and services? Tech.
Those that opted out of tech as too dangerous 20 years ago were hurt pretty badly. Just look at those that stuck to the European stock indexes. The next 20 years will be even more painful if one doesn’t have sufficient tech exposure. And private markets are a critical allocation given this new AI-driven productivity revolution.
Why this cycle will move faster and reward tech-heavy investors
We are also beginning to see why this cycle is so different from the SaaS era. The average SaaS company historically needed about seven years to reach $20 million in annual revenue.
Enterprise AI software companies are hitting that milestone in closer to two years. Many top performers are growing well above 200% annually, which is double the pace of last-generation software companies, and getting to profitability substantially faster. As long as AI companies continue driving real, measurable economic impact for their end users, this boom rests on fundamental value, not speculation.
The real winners of this cycle will be the builders who turn today’s massive infrastructure investments into the next generation of enduring companies. Investors who understand how to participate intelligently will be best positioned for what comes next.
The venture market isn’t shrinking around a few giants; it’s opening new frontiers at remarkable speed. There are many ways to play this wave as an investor. At Alpha Partners, we believe winning in this hyper-growth environment means co-investing in market leaders with strong fundamentals, a clear ROI for customers, a disciplined approach to valuation, and a focus on vertical application-layer businesses. There is substantial opportunity for investors and entrepreneurs that keep their heads down and focus on building great companies that add value to their customers, our economy and society.
Steve Brotman is the founder and managing partner of Alpha Partners, a growth-equity firm that co-invests in venture-backed companies by leveraging the unused pro-rata rights of more than 1,000 early-stage VC partners.
Related reading:
- Why This OpenAI And CoreWeave Investor Thinks The AI Market Is ‘Dangerously Overheated’
- The Great ‘AI Bubble’ Debate
Illustration: Dom Guzman
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Share:
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Why AI’s Next Phase Belongs To Infrastructure