Could the AI bubble finally be bursting? The recent Sora shutdown announcement and a loss of a Disney contract had people talking.
We’ve been watching the AI bubble for some time now. The circular investments, an overhyped product, adoption levels that don’t justify the sky high investments, and more are all signs that this is a massive bubble waiting to burst.
People have very good reason to hope that this bubble will finally burst as well. Among the examples of this includes the sharp rise in RAM chip costs, the flood of AI slop creeping into everything, the constant annoying advertising, and the annoying constant stream of promises that AI was going to take over everything (something that the mainstream media keeps falling for hook line and sinker). While the promises of an AI taking over everything has been renewed for yet another year with promises that AI will replace everyone’s jobs by the end of 2026 (the same promise that happened for the end of 2025, 2024, and 2023), more and more people are hoping that this whole AI bubble will finally burst so that people have a chance to go back to a more normal life. Indeed, I share that sentiment.
Recently, however, there was news that came down of OpenAI shutting down their crummy video generating service, Sora. This was paired with the ending of a $1 billion deal the company had with Disney – a deal that was widely considered to be a long haul deal. From the BBC:
OpenAI has shut down its artificial intelligence (AI) video-generation app Sora less than two years after its unveiling made headlines for creating realistic clips based on simple prompts.
At the same time OpenAI will also wind down its $1bn content partnership with entertainment giant Disney, the BBC understands.
OpenAI told the BBC on Wednesday that it has discontinued Sora so that it can focus on other developments, such as robotics “that will help people solve real-world, physical tasks”.
A spokesperson for The Walt Disney Company said “we respect OpenAI’s decision to exit the video generation business and to shift its priorities elsewhere”.
Disney will engage with other AI platforms to find ways to responsibly use the technology without infringing on intellectual property rights, a spokesperson said.
The news, unsurprisingly, was welcome by those who are hoping for the AI bubble to burst. A number of people are saying that this might be the moment that causes this to finally happen. From Slate:
The A.I. bubble might finally be on the verge of popping. On Tuesday, OpenAI CEO Sam Altman informed his staff that the company would be shutting down its video-generation model, Sora—just six months after launching a dedicated mobile app, and just three months after inking a deal with Disney to license hundreds of its name-brand characters for virtual avatars. OpenAI also appears to be winding down ChatGPT’s video functionality and taking all its animation APIs offline. In their place arrives “Spud,” an upcoming model about which Altman has provided no real details but has promised will “really accelerate the economy.”
“Spud” will be of no reassurance to Disney, which inked a billion-dollar deal with OpenAI in December to allow Sora users to generate likenesses of many characters. By all accounts, that was meant to be a friendship for the long haul, with a three-year contract and a planned Disney+ feature where subscribers could upload their Sora-Disney outputs. (At the time, an OpenAI executive heralded this as a cinematic sea change on par with the end of the silent-film era.) The termination seemed to surprise many at Disney, whose tech team apparently just learned of this “strategy pivot” on Monday night. In a statement to the Hollywood Reporter, Disney said that it “respects OpenAI’s decision” and “will continue to engage with AI platforms.”
Let’s be blunt. A highly capitalized A.I. startup that bails on one of its most prominent creations and largest corporate deals so soon after hyping them up for months on end is not in a good position as a business—especially at a moment when it plans to pursue an initial public offering, and thus expose itself to more financial scrutiny. And yet, it’s only one of OpenAI’s many recent troubles—and a sign that the A.I. bubble, while far from bursting outright, is wobbling and weakening as we speak. In other words, the one industry that’s keeping up the country’s growth on paper is closer to giving way and bringing about an all-around slowdown in economic activity, one that’ll make the current moment feel like a cakewalk by comparison.
Disney isn’t the only partner OpenAI is now holding at a robotic arm’s length. Throughout the year, several high-profile OpenAI commitments have sputtered, thanks to the company’s newfound frugality as well as an increasing sense of dissatisfaction from its business pals. In September, OpenAI announced a massive Texas data-center buildout in partnership with Oracle and SoftBank—only to declare it was pulling back on those expansion plans earlier this month. Nvidia, which agreed in September to provide OpenAI with a blitz of its all-powerful computing chips, stated this month that it would likely not go forward with those plans. In October, Walmart agreed to integrate ChatGPT into its chatbot-powered online shopping pilot, but ditched that experiment last week when the model consistently failed to improve store sales. Figure AI, which sent one of its humanoid bots to walk alongside first lady Melania Trump at the White House on Wednesday, cut off its collaborative efforts with OpenAI last month, as it preferred to utilize its self-developed models instead.
I share the hope that this might be the straw that breaks the camels back, I don’t know for sure if it will be. After all, I’ve had my hopes raised over previous incidences in the past only to be let down. For instance, there was that $1 trillion market selloff that happened back in February which recovered when the AI companies fired up the AI hype machines again. Then there was the massive 2025 stock market selloffs that only recovered thanks to the mainstream media helping to hype up AI again. Of course, who could forget the government rejecting an AI bailout package that totally wasn’t related to the possibility that the AI industry was on the verge of collapse?
I want to think that this is finally it, but I know I have been disappointed many times over in the past. Indeed, as I write this article, stock values for NVidia (down 3%), Amazon (down 8%), and Google (down 5%) have taken huge hits today which is encouraging on paper, but the Iran war is complicating the picture as well – a war that was sparked because Trump had a “feeling” and now everything on that front is a massive mess, causing oil price shocks and huge market selloffs as well.
Still, some in the mainstream media have responded to the speculation that this could be it by going in full denial mode. For example, there’s the extremely unconvincing article published in the LATimes:
Yes, ChatGPT concedes, Sora experienced a “sharp and early collapse in momentum” after it soared to No. 1 on the App Store in October, and yes, that decline was “more severe” than with other similar apps, but there are Many Other Factors. Including but not limited to intense competition, copyright disputes, legal “concerns” over deepfakes and misinformation, shifting priorities, failed business agreements (especially Disney’s concurrent decision to walk back its $1 billion investment) and the standard cost versus profitability argument — Sora cost way more, in terms of money and compute resources, than it brought in.
Add to that the specter of potential lawsuits — intensified, perhaps, by the strike against unregulated media creation, with Meta being found liable for millions in New Mexico and Los Angeles a day apart — and a potential IPO, and it does indeed feel like a perfect storm of issues led OpenAI to ax those parts of its business that are not performing well.
ChatGPT insisted that “Sora wasn’t failing because nobody wanted it. It actually went viral and gained huge interest, and AI video is still a crowded and growing space. That’s not,” the bot added rather testily, “what ‘rejected by the public’ looks like.”
Calm down, ChatGPT — if you blow a gasket, OpenAI is in real trouble.
Yes, there are those in the mainstream media still dumb enough to believe that ChatGPT is sentient. I didn’t think this needed to be explained… yet again… but ChatGPT is not sentient and will write out whatever the prompt asks in whatever hallucinated way it will. Asking it to say something is not proof that it believes in what it is saying. It’s just whatever got spat out afterwards. All you are doing is telling the world that you are a moron.
The LA Times author then puts this out to insist that AI is totally not in a bubble by framing the whole AI thing as “progress”:
Progress always has its detractors — the advent of radio, film and then television were each considered by some to be signs of a cultural apocalypse — but AI does present dangers that are far more excessive than panicked citizens briefly fearing that Martians had landed because Orson Welles was so convincing in his radio adaptation of “The War of the Worlds.”
There’s just one tiny problem with this argument: it’s not the same situation. With radio, there was considerable market adoption. This along with a viable business strategy for companies to jump on board and take advantage of the, at the time, new technology. Generative AI is not that.
As I pointed out in February, research has been finding that there is a huge chunk of the population that doesn’t want AI. The adoption of AI is nowhere near the levels that justifies the investment dollars going into it. With the trillions of dollars going in to AI, you should be seeing people all over the world practically falling over each other to adopt AI. We’re talking about having constant issues of server capacity and people, en mass, willing to pay thousands of dollars to use the AI offerings. If you are seeing problems like that being a daily thing, then the investment dollars would be justified.
Instead, look around you with what you are seeing in the real world. The only thing really driving up the hype is gullible mainstream media willing to believe anything AI tech bros say. Combine this with the fact that AI companies are struggling to even give their AI away for free as they desperately seek to spur AI adoption. The companies are literally cramming AI into anything and everything that has already been adopted with the hopes that more people will use it. This includes cramming it into cell phones, video editing software, email services, search engines, vehicles, and anything else they can think of. This desperation has sparked memes like the one below:
The desperation to get people to adopt AI is absolutely through the roof. It is the exact opposite scenario you want to see if you are talking about something that is “revolutionary” or a sign of “progress”. If it truly was as “revolutionary” or a sign of “progress” as they think it is, this wouldn’t even be a thing. People would be desperately trying to use your product, not you, as the company, desperately trying to get people to use it.
I really do hope that this is finally it and the AI bubble is finally bursting. This after multiple other promising moments that it is finally happening in the past. I’ll adopt a wait and see on this position just because I’ve seen recoveries after epic crashes in the past. Still, hope springs eternal that this might finally be it.
Drew Wilson on Mastodon, Twitter and Facebook.
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