Is the AI bubble bursting—or just moving through the hype cycle?
Is the AI bubble about to burst? While the enterprise application of large language models shows no signs of abating, the symptoms of AI fatigue are emerging.
Gartner refers to it as the trough of disillusionment, one of 5 phases in the company’s AI hype cycle, a model designed to map the maturity and adoption of AI technology. According to the model, early AI innovation gradually ascends to a peak of inflated expectations, followed, inevitably, by the current phase, where those heightened expectations fail to align with the reality of application outcomes.
We see it playing out across the globe. While business leaders expended nearly $2 million on AI projects in 2024, less than 30% of CEOs were happy with the outcomes, according to Gartner’s mid-2025 research.¹ More recent surveys conducted by McKinsey & Company indicate that less than 40% of projects are delivering core profitability.²
As the AI hype bubble nears a bursting point, two critical factors rarely make it into the discussion. One is the fact that organizations in many industries are still in the experimentation or piloting phases of AI development.³ It’s difficult to tout widespread AI success when the majority of projects have yet to be deployed.
The second is purpose. Palantir CEO Alex Karp made headlines late last year, boldly indicating that some AI investments may not create enough value to justify the cost of development. He said the biggest risk of failed returns lies with consumer-facing AI, whereas AI focused on generating specific results will soar and dominate the market.⁴
Another way to understand the true trajectory of AI is to follow Gartner’s AI Hype Cycle to its natural conclusion. Over time, use cases become clearer, leading to more productive and purpose-driven AI pilots and practical applications. Eventually, success becomes widespread and AI tools go mainstream, improving productivity, lowering costs, and delivering tangible business value.
The AI hype cycle accelerates.
While headlines tout AI fatigue, results from a recent PYMNTS report indicate the hype cycle is evolving faster than anticipated. In August of 2025, 98% of chief product officers at companies with billion-dollar revenues were unwilling to grant autonomous AI agents control over critical processes. Fast forward just months to November, and 40% of those same product leaders had granted autonomous authority in core use cases as the number of projects moving to active deployment soared 23%.⁵
McKinsey adds further weight to the findings, indicating that leaders in technology and manufacturing are already reporting cost benefits from AI applications.⁶ But what sets high performers like these apart from the rest?
McKinsey’s research indicates that knowing when to include human input in the process to ensure accuracy is the single biggest factor in achieving positive AI outcomes. The second is technology infrastructure and having an architecture that allows for the implementation of core AI as well as emerging innovations.⁷
Canoe Intelligence is a prime example of AI that has moved beyond the trough of disillusionment. By adhering to a narrowly defined purpose, we’ve tackled one of the most complex processes in asset management—the ingestion and interpretation of alternative markets data. Canoe automates the extraction of unstructured information from documents, such as capital calls, distributions, and NAV statements, mapping details to bespoke reporting formats to generate useful and accurate insights.
With a 12-year history of creating AI models, we have a head start on others in our industry. We’ve generated the pilots, isolated the efficiencies, and moved on to a point where Canoe AI can be viewed simply as one of those aforementioned mainstream tools used to generate both cost savings and productivity gains in private markets. Our products are built on proprietary machine learning models, allowing us to rapidly integrate new and emerging technologies, keeping our customers on the cusp of cutting-edge capabilities.
Most importantly, we have long aligned with McKinsey’s findings on human intervention. Canoe’s AI models perform the initial extraction, rapidly processing large volumes of data, while flagging anomalies for human review. We don’t replace human intelligence; instead, we use strategic human oversight to augment AI’s capabilities.
In an age where AI hype has led to disillusionment, Canoe has evolved beyond initial pilots and the learning phase of AI. We already deliver practical applications trained on and designed for alts data to ensure reliable reporting and valuations across the alts environment.
¹ Haritha Khandabattu. “The 2025 Hype Cycle for Artificial Intelligence Goes Beyond GenAI.” Gartner, Jul. 8, 2025. Web.
² “The State of AI in 2025: Agents, Innovation, and Transformation.” McKinsey & Company, Nov. 5, 2025. Web
³ “The State of AI in 2025: Agents, Innovation, and Transformation.” McKinsey & Company, Nov. 5, 2025. Web.
⁴ Prabhjote Gill. “Palantir CEO Alex Karp Says There Are Two AI Markets And Only One ‘Actually Works’: Report.” Stocktwits, Nov. 13, 2025. Web.
⁵ Karen Webster. “AI Doers Drown Out AI Naysayers.” PYMNTS, Jan. 12, 2026. Web.
⁶ “The State of AI in 2025: Agents, Innovation, and Transformation.” McKinsey & Company, Nov. 5, 2025. Web.
⁷ “The State of AI in 2025: Agents, Innovation, and Transformation.” McKinsey & Company, Nov. 5, 2025. Web.
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About Canoe Intelligence
Canoe Intelligence (“Canoe”) is the platform for smarter alts management. We redefine alternative investment intelligence with AI-driven software that directly addresses the core challenges of private markets. Our technology empowers institutions, LPs, and wealth managers to future-proof their alts infrastructure, modernizing systems and providing a scalable foundation for long-term growth and compliance. By automating manual data processing with AI-native precision, Canoe helps clients reduce operational costs and risks, significantly lowering overhead and mitigating errors. Ultimately, our timely, accurate, and comprehensive data enables investment teams to drive superior investment outcomes through deeper insights and more profitable allocation strategies. With Canoe, it’s all about making Alts, smarter. Learn more at www.canoeintelligence.com.
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Betsy Miller Daitch
Canoe Intelligence
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