Binance founder Changpeng Zhao (CZ) took to X on Friday to argue that most artificial intelligence companies will eventually go bust, even as the sector experiences unprecedented capital inflows. His prediction landed during one of the busiest stretches in AI fundraising history, with two private firms—Anthropic and OpenAI—collectively valued near $1.8 trillion and several smaller startups still grappling with the challenge of converting heavy spending into sustainable profits.

The Crowded AI Landscape

Zhao posted that AI itself “will stay and grow exponentially,” but he stressed that the current crop of AI firms is far too crowded to survive. He added that even the eventual winners will see “huge price fluctuations” and face fresh competition from new entrants. His comments reflect a broader skepticism about the sustainability of the AI build-out, a sentiment that has been echoed by other industry veterans.

CZ framed the situation as a normal pattern in early-stage industries, where a flood of capital tends to produce only a small number of long-term winners. He has previously argued that AI agents need tokens in only a narrow set of cases, signaling a cautious approach toward the tokenization of AI services. This perspective is particularly noteworthy given CZ's background as the founder of Binance, the world's largest cryptocurrency exchange, where he witnessed the rise and fall of hundreds of blockchain projects during the crypto boom and subsequent market corrections.

Record Valuations Amidst Doubts

Anthropic announced a $65 billion Series H round on Thursday at a $965 billion post-money valuation, almost tripling its $380 billion mark from February, according to reports. The round was led by Altimeter Capital, Dragoneer, Greenoaks, and Sequoia Capital, lifting the firm above rival OpenAI in implied worth. The company also reported a $47 billion annualized revenue run rate, up from $30 billion earlier this year and $10 billion in full-year revenue last year. Recent reports peg Anthropic’s implied pre-IPO valuation on Jupiter prediction markets above the pre-IPO trillionaire mark, placing it alongside SpaceX and OpenAI.

OpenAI sits one rung lower, valued at $852 billion after its March mega-funding round. The ChatGPT maker is now preparing a confidential S-1 filing with Goldman Sachs and Morgan Stanley, targeting a public market debut as soon as September at a price analysts expect to push past $1 trillion. Despite these eye-watering valuations, questions remain about profitability. OpenAI itself has guided to annual losses through at least 2028, including $74 billion in operating losses that year alone, even as it commits to $1.4 trillion in datacenter spending over eight years.

Corporate AI Spending: High Costs, Uncertain Returns

The optimism around Anthropic and OpenAI sits uneasily next to the experience of corporate AI buyers. Earlier in May, Uber CEO Dara Khosrowshahi told analysts that the ride-hailing firm was slowing hiring to absorb its AI investments, while struggling to show clear returns from the spend. Uber CTO Praveen Neppalli Naga disclosed in April that the company had burned through its entire 2026 budget for Anthropic’s Claude Code and developer tool Cursor in only four months. The COO also publicly questioned whether higher AI token usage was actually improving consumer products, saying that link “is not there yet.”

This pattern is not isolated. National Bureau of Economic Research data published in February showed 90% of firms reported no measurable AI impact on workplace productivity. The disconnect between heavy AI investment and tangible results has led some analysts to liken the current AI boom to the dot-com bubble of the late 1990s, where massive infrastructure spending preceded a market correction that wiped out most startups.

Hyperscaler Revenue Loops Under Scrutiny

Concerns over hyperscaler revenue loops have intensified, with Anthropic and OpenAI alone underwriting more than half of the roughly $2 trillion in future cloud commitments held by Microsoft, Amazon, Google, and Oracle. These cloud providers have been aggressively funding AI startups, partly to secure usage of their cloud services. However, if the AI startups fail to generate profits, the cloud commitments could turn into liabilities, creating a cascading effect across the tech sector.

Meanwhile, smaller AI firms are finding it increasingly difficult to secure funding. Venture capital investment in AI has become concentrated among a handful of mega-rounds, leaving early-stage startups with limited access to capital. This trend mirrors what happened during the crypto boom, where a few large exchanges and protocols absorbed the majority of market value while countless smaller projects faded away.

Crypto and AI: Parallel Trajectories?

CZ’s warning draws on his experience in the cryptocurrency space, where he witnessed the explosive growth and subsequent collapse of many projects during the 2017-2018 bull run and the 2022 market crash. He has often drawn parallels between the two industries, noting that both are driven by hype cycles but require real-world utility to sustain long-term value.

In a previous interview, CZ stated that “AI agents need tokens in only a narrow set of cases,” suggesting that many AI projects are over-engineering their economic models. He believes that the most successful AI applications will be those that seamlessly integrate into existing systems without requiring complex tokenomics.

The Road Ahead: Profitability vs. Hype

Anthropic is on track for its first operating profit this quarter, but most of the sector still spends faster than it earns. The next real test arrives when OpenAI’s S-1 reveals what a trillion-dollar AI company actually looks like on a balance sheet. If the filings show unsustainable spending patterns, investor sentiment could shift rapidly, triggering a valuation reset across the industry.

Regulators are also paying closer attention. In the United States, the Securities and Exchange Commission has signaled that it will scrutinize AI companies’ revenue recognition practices, especially those that rely on related-party transactions with cloud providers. In Europe, the AI Act imposes strict compliance requirements on high-risk AI systems, adding further costs for startups.

Despite the challenges, the underlying technology continues to advance. Breakthroughs in reinforcement learning, natural language processing, and computer vision have opened new applications in healthcare, robotics, and autonomous systems. However, turning these breakthroughs into profitable businesses remains the critical hurdle.

CZ’s prediction that most AI firms will go bust may seem pessimistic, but it aligns with historical patterns of technology adoption. From the internet to smartphones to cryptocurrency, each major innovation wave has seen a period of overinvestment followed by a shakeout that separates the winners from the losers. The question is not whether there will be a correction, but when it will happen and which companies will survive.

As the AI industry matures, investors are increasingly focusing on fundamentals such as revenue growth, margin expansion, and customer retention. Companies that can demonstrate a clear path to profitability, like Anthropic with its first projected operating profit, are likely to weather the storm better than those still burning cash without a clear monetization strategy.

For now, the AI race continues at breakneck speed, with capital flowing into frontier labs and corporate budgets expanding. But CZ’s warning serves as a reminder that hype alone cannot sustain an industry indefinitely. The true test will come when the funding taps tighten and the market demands tangible returns.

Source:BeInCrypto News