Beyond The Buzz: AI’s Real Impact And Illusions We Must Avoid

The narrative around artificial intelligence often swings between exuberant enthusiasm and skeptical caution. Is AI just another tech hype cycle or a lasting transformation?

The truth is far more foundational: AI is not a standalone sector. It is an infrastructure layer, just like the internet once was, and it’s being embedded across every industry, from healthcare to agriculture, from fintech to entertainment.

To frame AI as a trend misses the bigger picture. It is not stealing the spotlight from other sectors. It’s powering them.

AI is not a vertical, it’s horizontal infrastructure

Much like we no longer classify “internet companies” as a separate category, AI will soon follow suit. Every industry is already integrating AI into its core operations. So when we see that more than 50% of venture investments are going into AI, it is not a crowding-out effect. It is a signal that AI is a layer within adtech, cybersecurity, education, traditional manufacturing and more.

Calling AI a standalone “sector” oversimplifies its omnipresence.

Valuation discipline is needed, especially at early stage

The excitement has attracted significant capital, but not all startups justify their valuations. Some pre-seed companies with little more than a slide deck have raised at $100 million-plus valuations.

While these terms might look impressive on paper, they are often setting founders up for future funding challenges. As the market corrects and ties valuations more closely to actual commercial traction, companies with no product-market fit may struggle.

That said, some native AI players are building defensible businesses with strong early revenue and the potential to define new categories.

The next wave will address the challenges AI creates

The compute cost of running large-scale AI models is unsustainable. Hyperscalers are spending nearly $700 million per day to keep up with demand. Technologies that can reduce AI’s CapEx by an order of magnitude will unlock the next phase of profitability and scalability.

Meanwhile, digital trust is eroding as AI accelerates misinformation, deepfakes and identity confusion. Building a layer of digital integrity, particularly for agentic AI, will be essential. Identity verification, content provenance and transparent model disclosure are now mission-critical for the health of the internet.

Itay Sagie is a strategic adviser to tech companies and investors, specializing in strategy, growth and M&A, a guest contributor to Crunchbase News, and a seasoned lecturer. Learn more about his advisory services, lectures and courses at SagieCapital.com. Connect with him on LinkedIn for further insights and discussions.

Related reading:

• Global Venture Funding In 2025 Surged As Startup Deals And Valuations Set All-Time Records
• The AI Value Chain Has Shifted. Here’s How Founders Can Still Build A Sustainable Business

Illustration: Dom Guzman