There’s No Real Money in AI Business, Just Rented Dreams and Delusional Valuations

How an Industry Built on Probabilities, Wrappers, and Hype Will Collapse Faster Than It Scaled
AI is real. The revolution is happening. But the AI startup economy? It's the most expensive mirage in tech history.
Every decade has its bubble. This time, it's not crypto, not dot-com, it is AI wrappers pretending to be products. What we're witnessing isn't value creation. It's a rent-based economy built on probabilistic tools, dressed up as unicorns, and sold to investors as inevitable monopolies.
Let's get something straight: AI is a tool, not a product.
Like electricity or the internet, it enhances, augments, automates. But it doesn't define value. It doesn't guarantee success. It doesn't create economic defensibility on its own. Yet somehow, we've built a multibillion-dollar startup ecosystem where companies rent someone else's intelligence, add a UI, and call it innovation.
The Service-to-Feature Death Sentence
Every AI startup is living on borrowed time, counting down to the moment their "revolutionary AI solution" becomes a checkbox in Microsoft Office.
Remember email marketing tools? Now it's a Gmail feature. Remember when photo editing was a business? Now it's an iPhone camera button. Remember when translation services charged by the word? Now Google does it for free. This is happening to AI right now, in real time, at hyperspeed. ChatGPT didn't just launch an AI assistant. It launched the countdown timer for every AI wrapper company on Earth. Each new feature OpenAI adds is another startup's funeral bell.
The Chinese Earthquake That Shattered Everything
Then DeepSeek walked into the room. A Chinese company nobody had heard of just delivered GPT-4 level performance at a fraction of the cost. Not slightly cheaper. Devastatingly cheaper. The kind of price disruption that makes entire business models evaporate overnight.
Suddenly, every AI startup charging premium prices for "proprietary AI solutions" found themselves selling gold-plated shovels in a world where equally good shovels cost pennies.
This is what happens when technology has no moat. One breakthrough, one efficient competitor, one algorithmic innovation, and years of Silicon Valley investment become worthless paper. DeepSeek didn't just offer better AI, they revealed that American AI companies were charging Rolls Royce prices for Toyota performance, and everyone was too caught up in the hype to notice.
AI Doesn't Sell Products, It Sells Probabilities
AI is inherently probabilistic, not deterministic. That means it doesn't do one thing perfectly. It offers a best guess, often good enough, sometimes magical, occasionally catastrophically wrong. That's fine for user experiences. But it's deadly for economics.
Probabilistic tools cannot guarantee value capture. They're only useful when embedded in real, defensible products with deterministic outcomes. Yet AI startups have flipped this upside down: instead of solving problems, they're selling the tool as the solution.
The Math That Kills: AI at Scale = Death by User
In every other industry, scaling is winning. More customers, lower unit costs, unlocked profitability. In AI? Scaling is your deathbed.
AI startups positioned themselves as genies: "Your wish is our command!" But genies in fairy tales have unlimited power. AI startups have unlimited expenses.
Every user costs money. Every interaction burns compute. Every chat, query, or prompt pushes the model closer to red.
When someone types: "Hi, I'm feeling blue. What should I do?" that costs real infrastructure money.
When someone else says: "Write me a DCF model for Google stock and explain it like I'm five," that costs even more.
And each time, the LLM responds like a magical oracle, hallucinating its way through spreadsheets and emotional support like an overconfident intern. Because these models don't "know", they guess powerfully, beautifully, sometimes hilariously, but always probabilistically. And those guesses are expensive.
The broken math every AI startup runs on:
• Costs: API usage, compute rent, energy, salaries
• Revenue: Maybe... someday
• Reality: Every new user scales loss, not profit

They raise money to cover the gap. They call it growth. They celebrate burn rate as market penetration. But it's just accelerated insolvency.
Cost > Revenue → Scale → Bankruptcy
VCs see "10x user growth." They don't see "10x the loss per interaction." It's the startup equivalent of selling dollars for 90 cents and bragging about market share.
ChatGPT: The Most Expensive Therapist in Tech
OpenAI is hemorrhaging millions per day. Every conversation bleeds dollars. Every free API call, every custom GPT, every wrapper startup feeding user data, all of it is a slow bleed disguised as growth.
So what's the business model? Simple:
1. Let startups bleed for you
2. Sell them API access
3. Let them wrap your model in a glossy UI
4. Let them spend VC money attracting users
5. Let those users generate free training data
6. Let your model improve and quietly eat their business alive
It's genius. It's brutal. And it's completely unsustainable for anyone except the infrastructure owners. It’s not a business model. It’s investor funded cannibalism.
Why Only Infrastructure Companies Win
Let's talk about real money. Who gets paid regardless of who wins the AI arms race?
• NVIDIA: Sells the chips, powers the training, controls the compute
• Microsoft/Google/AWS: Rent the infrastructure, own the cloud, store the data
• Power companies: Literally keep the models running
These companies own physical, margin-rich products. Their economics are crystal clear:
• Chips = revenue
• Compute = recurring income
• Storage = real estate for data
They don't need AI to work at all. They profit every time someone tries.
Microsoft's investment in OpenAI wasn't visionary, it was tactical. Why build your own LLM when you can own the infrastructure it runs on, lock in the compute, control the data pipeline, and capture the entire value chain.
The Pharaohs of Silicon Valley
I am Egyptian. I've walked among the ruins of civilizations that wielded the most advanced technology of their time. The pharaohs-built wonders with mathematics, engineering, and organizational systems that still amaze us today. They carved their legacies into stone and reached for immortality.
But they misunderstood the purpose of their power.
They built monuments, not sustainable systems. They aimed for immortality, not resilience. They engineered pyramids instead of trade routes. When their economy shifted, when their technology was surpassed, when the mathematics of empire no longer worked, they became relics in the abyss of history.
AI startups today are digital pharaohs. They wield the most advanced technology of our time. They build pitch decks, not products. They chase virality, not viability. They're engineering pyramids out of probabilistic outputs beautiful, brittle, and doomed.
Like the pharaohs, they've forgotten the most fundamental law: Markets run on economics, not enthusiasm. Technology is dynamic, but mathematics is eternal. And the math doesn't lie.
The pharaohs thought their technology would save them from economic reality. They were wrong. AI startups think the same thing. They will be wrong for the same reason.
When the economy shifts and it will they'll join the ruins. Museum pieces. Footnotes in the next Gartner report.
Wrappers Renters – le Monde a l’inverse
What most AI startups are doing isn't innovation. It's digital arbitrage, renting intelligence from a model they don't own, dressing it up, marking it up 1000%, and hoping no one notices.
These companies exist not to solve problems but to capitalize on investor delusion. It's not a product. It's not a business. It's a wrapper. And like all wrappers, they're disposable.
Want examples?
• Jasper: $1.5B valuation, disrupted when ChatGPT added native text tools
• Tome: Undermined when PowerPoint got Copilot
• Copy.ai: Competing with free—and bleeding out quietly
This isn't a trend. It's a preview.

DeepSeek Was Just the First Pin
When DeepSeek dropped a GPT-4-level model at a fraction of the cost, it didn't just disrupt pricing, it revealed the lie: There is no moat. Any sufficiently funded lab can replicate the magic.
AI models are not monopolies. They're commodities waiting to happen. As soon as performance normalizes across open-source or international competitors, the margins disappear and so do the wrappers.
The Theater Is Burning
The AI economy feels like a beautifully staged play:
• The infrastructure owners built the stage
• The model creators wrote the script
• The startups are actors frantically performing for funding
• The audience (users) pays with attention, data, and time
But the lights are dimming. The budget is gone. And when the curtain falls, only the owners of the stage will still be making money.

Who Actually Wins?
Let’s pull back the curtain.
Winners:
• NVIDIA: They sell shovels in the gold rush. GPUs, chips, platforms. They don’t care who strikes gold.
• Microsoft, Google, AWS: They rent compute, sell cloud, harvest enterprise data. They don’t build the wrappers — they wait, then integrate.
• Utility Providers: The real AI winners? Power grids. Data center landlords. Chip fabs. They run the world — quietly.
Losers:
• 90% of AI startups.
• Anyone building on rented infrastructure without owning data, product, or customer loyalty.

The Reality Check That's About to Hit Different
The AI Revolution Is Real: AI technology will change everything, and will transform industries.
AI Startups Are Mostly Illusion: They're expensive middlemen pretending to be the future while getting eliminated by the actual future.
The Infrastructure Always Wins: NVIDIA makes chips, Microsoft owns clouds, power companies sell electricity. They have real products with real margins.
The Wrappers Always Lose: Pretty interfaces on someone else's technology don't create defensible businesses.
Markets can stay irrational longer than you can stay solvent, but eventually, physics kicks in. Mathematics is patient, but it's also inevitable.
You can't lose money on every customer and make it up in volume. You can't build sustainable businesses on rented technology. You can't create moats with commodity tools.
Final Truth: AI Is the Swiss Army Knife, Not the Product
The most misunderstood truth in this entire industry: AI is a tool, not a product.
Like a Swiss Army knife powerful, versatile, revolutionary. But you still need to build the thing it helps cut, fix, or assemble. You don't build a business around owning the knife. You build a business around using it better than anyone else to solve real problems for real people with real budgets.
Use AI to make healthcare 10x faster. To make compliance 90% cheaper. To make logistics seamlessly predictive. To make knowledge workers 5x more productive.
That's value. That's a moat. That's a business.
Anything else is just theater, expensive illusions paid for with venture capital, fueled by hype, and destined for the same fate as every other technological mirage in history.
The Only Intelligence That Matters
The AI revolution is real. The current crop of AI startups won't be. Only those who use AI to solve real, painful problems with durable economics will survive the coming wipeout. Everything else is probabilistic theater, and the sandcastle is already cracking.
There's no money in AI startups because there are no AI products, only expensive services built on someone else's infrastructure, marketed to investors who confused complexity with value.
Welcome to the great AI bankruptcy wave. The math was always obvious. The ending was always inevitable. Only the greed was artificial.
The intelligence was always real and it belonged to the companies smart enough to own the infrastructure instead of renting dreams.
If AI is the electricity of the 21st century, the people getting rich are the ones building power plants, not the ones selling electric candles.
Stop buying the candles. Build the power plant.
The pharaohs were doomed cause they didn’t see the abyss of their wrong turns. Don't repeat their mistake.