AI Bubble Watch
Week of October 27th, 2025
Welcome to AI8’s weekly newsletter, your ultimate source for curated insights and updates from the dynamic world of venture capital!
From billion-dollar rounds to market-defining shifts, we deliver the intelligence powering the global investment landscape, moving investors and innovators forward. At 8alpha.ai, we’re not waiting for the future of capital, we’re building it. Stay sharp, stay curious, and stay ahead.
STARTUPS
ROUNDS AND UNICORNS
The Week’s 10 Biggest Funding Rounds: More AI Megarounds (Plus Some Other Stuff) (Crunchbase, 5 min read)
Crusoe Energy Systems (AI Data Centers): Denver-based Crusoe Energy Systems raised $1.38 billion led by Valor Equity Partners and Mubadala Capital, valuing the company at over $10 billion. Crusoe builds AI data centers and energy-efficient infrastructure to power large-scale compute workloads
Avride (Autonomous Vehicles): Austin-based Avride secured $375 million backed by Uber and Nebius Group. The company plans to launch its first robotaxi service on Uber’s platform in Dallas later this year
Redwood Materials (Battery Recycling): Redwood Materials raised $350 million in a Series E round led by Eclipse Ventures, with Nvidia’s NVentures among new investors. Founded in 2017, the Nevada-based recycler has raised over $2 billion to date
Uniphore (Agentic AI): Palo Alto’s Uniphore closed a $260 million Series F round from Nvidia, AMD, Snowflake Ventures, and Databricks Ventures, reaching a $2.5 billion valuation. The company builds AI platforms that enable enterprise-grade agentic AI
Sesame (Voice AI & Smart Glasses): San Francisco-based Sesame, led by former Oculus CEO Brendan Iribe, raised $250 million in a Series B led by Sequoia Capital to scale its voice AI and smart glasses technology
Sure, Valuations Look High. But Here’s How Today Is Different From The Last Peak (Crunchbase, 2 min read)
Market watchers are increasingly questioning whether the current AI-driven tech boom has reached bubble territory, echoing parallels with the 2021 peak, but with key differences. Today’s surge is far more concentrated, with AI startups and megacaps capturing most of the capital while other sectors like biotech, cleantech, and consumer products stagnate. IPO activity has slowed dramatically, with fewer than 50 venture-backed listings in 2025 compared to hundreds in 2021, and companies like OpenAI and Anthropic still private
Funding is also focused among fewer players, with megarounds of $100M+ at record highs and OpenAI’s $40B round alone representing about 25% of total U.S. megaround funding
Unlike 2021’s low-rate environment, today’s market faces higher borrowing costs and slower hiring, though tech valuations remain inflated
Analysts warn the cycle may be nearing its peak, even if the correction looks different this time
Are we in an AI bubble? Here’s what analysts and experts are saying (CNBC, 4 min read)
The AI boom has become one of the most debated topics in global markets, with over 1,300 AI startups now valued above $100 million and nearly 500 unicorns exceeding $1 billion. Global AI spending is projected to reach $375 billion in 2025 and $500 billion by 2026, fueled by tech giants like Microsoft, Meta, Amazon, and Nvidia, which are investing tens of billions in data centers and chips. Some analysts warn of a bubble reminiscent of the dot-com era, citing “a vast gap”between $1 trillion in AI deal value and limited profit visibility. The AI economy now accounts for a third more of global investment share than the internet boom did, blurring the line between revolution and speculation
Others, including BlackRock’s Larry Fink and ING’s Anneka Treon, see sustainable long-term investment supported by strong fiscal conditions and infrastructure needs
While former Intel CEO Pat Gelsinger admits“we’re in a bubble,” he expects it to last years before any correction
Investors like Howard Marks and Ben Inker note early “bubble-like” behavior, including debt-fueled spending and inflated valuations, but say the mania isn’t yet at 1990s levels
ECONOMIC SNAPSHOT
US and China agree framework of trade deal ahead of Trump-Xi meeting (BBC, 3 mins read)
The U.S. and China have agreed on a trade deal framework that could avert Trump’s planned 100% tariffs on Chinese goods and ease escalating tensions between the two nations. The agreement, to be finalized during Trump and Xi Jinping’s meeting in South Korea this week, includes a final deal on TikTok’s U.S. operations, a one-year delay on China’s rare earth export restrictions, and the resumption of large soybean purchases by Beijing, an industry worth over $14 billion annually to U.S. farmers
U.S. Treasury Secretary Scott Bessent confirmed that both sides reached “a substantial framework”and described discussions as “constructive”
The White House also announced new trade agreements with Malaysia, Thailand, Cambodia, and Vietnam, expanding access to critical minerals and regional exports
Together, these moves mark the first major de-escalation in the U.S.–China trade conflict
Trump says he’s increasing tariffs on Canada by 10% after Ontario’s Reagan ad (CNN, 4 min read)
President Donald Trump has raised tariffs on Canadian imports by 10%, intensifying tensions with America’s second-largest trading partner after accusing Ontario’s government of airing a “fraudulent” ad that misused a 1987 Ronald Reagan anti-tariff speech. The move follows Trump’s suspension of trade talks and his recent 100% tariff on Chinese goods, signaling an increasingly aggressive trade stance. Canada exported $411.9 billion in goods to the U.S. last year, but key sectors, autos, steel, aluminum, lumber, and energy, have already been hit hard by previous levies, pushing the country’s unemployment rate to a nine-year high
The fallout is also being felt in the U.S., with exports of American spirits to Canada plunging 85% and Canadian travel to the U.S. down 31%
Canadian officials, including Prime Minister Mark Carney, urged diplomatic resolution, warning that prolonged escalation could threaten the USMCA free trade zone
AI is keeping the US economy out of a recession (Yahoo Finance, 3 min read)
The U.S. economy has avoided recession for two years, defying tariff shocks, high interest rates, and global instability, thanks largely to artificial intelligence. According to BNP Paribas economist James Egelhof, “AI has kept the economy out of a recession.” AI-related capital spending added an estimated 1.3 percentage points to Q2 GDP growth, per Bank of America Research, while small business tech payments jumped 7% year-over-year in September, showing adoption is spreading beyond Big Tech
Goldman Sachs estimates hyperscalers like Microsoft, Meta, Alphabet, and Amazon now drive over 25% of all S&P 500 capex, expanding at a 75% annual rate, as data center investment replaces office construction
Economists say the AI boom has “broken” traditional monetary policy, since investments are funded by soaring equity valuations rather than debt, blunting the Fed’s tightening impact
The AI surge has lifted stocks, business confidence, and hiring, prompting the Fed to start easing rates despite lingering inflation
AI spending is boosting the economy, but many businesses are in survival mode (CNBC, 4 min read)
The U.S. economy is increasingly split between an AI-driven boom and a struggling Main Street. While AI-related spending added 1.1% to GDP growth in early 2025, small businesses are being squeezed by Trump’s tariffs, which are projected to cost global firms $1.2 trillion this year, much of it passed on to consumers. AI giants Nvidia, Microsoft, Alphabet, Amazon, Meta, Apple, Tesla, and Broadcom, now make up 37% of the S&P 500’s value, helping the index rise 15% this year as Nvidia’s market cap hit $4.5 trillion
Yet the real economy is weakening: manufacturing has contracted for seven straight months, construction costs are up 4.6%, and major retailers like Target and Starbucks have cut thousands of jobs
Consumer sentiment is at its lowest since 1997, with 57% expecting the economy to worsen, and Gen Z and Millennials planning to spend 34% and 13% less, respectively, this holiday season
Economists warn that while AI is “propping up the numbers,” the rest of the economy faces slowing demand, shrinking margins, and what one expert called a “bumpy road” ahead
What The Second Wave Of Layoffs Means For Workers And Startups (Crunchbase, 2 min read)
The second wave of tech layoffs following Google, Amazon, and other major firms’ 2024–25 cuts is reshaping the startup labor market, flooding it with top-tier talent while extending job searches to six to seven months on average. Around 36% of U.S. adults now have side gigs, with over half starting them in the past two years, as contract and freelance work surge amid uncertainty. Startups, meanwhile, are running leaner reflecting a broader trend where seed-stage teams have shrunk by nearly 50% since 2022
Roughly 90% of tech executives are open to hiring freelancers, creating a hybrid model of smaller core teams plus project-based specialists
For founders, it’s a rare chance to recruit elite talent affordably; for workers, startups offer clearer upside and flexibility. The new rule of survival? Adaptability wins
IPO & EXITS
US companies strike $80bn in mergers as Trump-era openness boosts dealmaking (Financial Times, 3 min read)
U.S. companies announced more than $80 billion in mergers within 24 hours, signaling a sharp rebound in dealmaking under President Trump’s pro-business administration. The biggest move came from American Water Works and Essential Utilities, merging into a $63 billion utilities giant serving 4.7 million customers across 17 states. Huntington Bancshares also unveiled a $7.4 billion takeover of Cadence Bank, while Novartis agreed to buy Avidity Bioscience for $11 billion, bringing the total to $81.4 billion in enterprise value
Analysts say “Merger Monday is back,” driven by lower interest rates, a favorable antitrust climate, and regulatory openness to large consolidations
U.S. M&A activity surpassed $1 trillion in Q3 2025, with more than 50 deals over $10 billion announced so far, putting the year on track for a record wave of megadeals since 1995
Experts warn optimism should be tempered, but momentum suggests “dealmaking breeds dealmaking” as industries from utilities to finance rush to consolidate
Liquidity demand fuels new generation of secondaries managers (PitchBook, 3 min read)
The rise of emerging secondaries managers is reshaping private markets as investors seek liquidity in a world where companies are staying private longer. Once a niche strategy, secondaries investing, the buying and selling of LP fund stakes and direct company interests, has become one of the fastest-growing areas in private capital. In 2025, emerging secondaries funds raised a record $3.8 billion, contributing to nearly $108 billion in total global secondaries fundraising, just shy of last year’s all-time high
Industry experts say demand is driven by a growing supply-demand imbalance as investors look to exit older funds and free up capital
Alongside established players expanding into secondaries, a new wave of independent managers is entering the market, offering innovative approaches like preferred return structures and carry advances
Despite record fundraising, the market remains undercapitalized, with room for further growth
WHAT A TIME TO BE ALIVE
Why are American women leaving the labour force? (The Economist, 3 min read)
After nearly 80 years of steady progress, women’s labor-force participation in the U.S. is slipping for the first time in decades. After peaking at 57.7% in August 2024, it has dropped to 56.9%, meaning roughly 600,000 women have exited the workforce, the largest widening of the male-female participation gap since the 1950s. The decline isn’t driven by weak industries: female-dominated sectors like education and healthcare are still adding jobs. Instead, demographic shifts may be at play
A post-pandemic mini baby boom appears to have reduced participation among mothers of young children, even though the total number of working mothers has actually risen to 7.9 million
Many are expected to return after maternity leave, but stricter return-to-office mandates could slow re-entry
Studies suggest remote work previously helped sustain women’s employment, highlighting how workplace flexibility may again determine whether this dip becomes a lasting reversal
8alpha.ai is an AI fintech transforming cash-generating businesses into scalable, AI-powered companies. We provide revenue-based financing and hands-on AI transformation, delivering no zeros with unlimited upside. We’re the architects building financial infrastructure for the next generation of investors and startups.
Become part of our revolution.
Happy reading,
8alpha.ai’s Research & Investment Team
