So, About That AI Bubble

Six months ago, the AI sector was looking pretty bubbly. Companies were plowing hundreds of billions of dollars, much of it borrowed, into building new data centers, but had no clear path to profitability. Experts and journalists, myself included, were comparing the AI build-out to the railroad bubble of the 1800s and the dot-com bubble of the ’90s, in which speculation led to overinvestment that eventually crashed the stock market. Even Open AI CEO Sam Altman voiced public doubts. “Are we in a phase where investors as a whole are overexcited about AI?” he said last year. “My opinion is yes.”Today, however, we’re in a very different world. Software developers are adopting AI tools en masse and reporting astronomical productivity benefits. The worry that the country is building too many data centers now coexists with the fear that we won’t have enough of them to satisfy the public’s growing appetite for these products. And the company previously known as OpenAI’s junior competitor has become possibly the fastest-growing business in the history of capitalism. Anthropic’s revenue is increasing faster—much faster—than Zoom’s during the pandemic, Google’s during the early 2000s, and even Standard Oil’s during the Gilded Age. If the company’s current growth rate were to continue, then by early next year it would be taking in more money than any company in the world.The cause of this turnaround can be summarized in two words: Claude Code.When Anthropic released an update to its flagship product in November, AI seemed to cross some invisible threshold between interesting gadget and life-changing technology. With Claude Code, a team of autonomous AI agents could take over your computer and, in minutes or hours, complete programming tasks that previously would have taken humans days or weeks. In many cases, the final product required few, if any, human changes. Other companies have since released updates to their own coding tools, such as OpenAI’s Codex and Anysphere’s Cursor,