AI Dreams Collide With Market Reality in Week of Warnings

21th August 2025

An MIT study found that 95% of generative AI pilots fail, with startups targeting narrow use cases succeeding while big firms struggle, echoing OpenAI CEO Sam Altman’s warning of an AI investment bubble. Intel gained a boost from a $2B SoftBank investment and potential U.S. government equity support, though analysts argue its execution issues in PCs, AI, and chip manufacturing remain unresolved. Google unveiled its Pixel 10 phones with modest hardware changes but leaned heavily on Gemini AI features, aiming to position artificial intelligence as the brand’s main selling point. JPMorgan and MUFG are in talks to help finance a $22B Texas data center project, underscoring growing demand for AI infrastructure. Meanwhile, U.S. stocks slipped as investors rotated out of high-priced tech shares into safer sectors ahead of Fed Chair Jerome Powell’s Jackson Hole remarks. Tech weakness was led by AI-linked chipmakers, while Apple and Meta also declined on bubble concerns. All this in today’s Read It and

Major Headlines 

• MIT Study Finds 95% of Generative AI Pilots Fail as OpenAI’s Sam Altman Warns of Industry Bubble

A new study out of MIT has found that the vast majority of generative AI pilots about 95%  are failing to deliver meaningful results, underscoring a growing disconnect between the hype surrounding artificial intelligence and its real-world business impact. The report, titled The GenAI Divide: State of AI in Business 2025, was based on hundreds of interviews, surveys, and AI deployment analyses. It concluded that while startups focusing on narrow pain points are seeing rapid revenue growth, most large enterprises are struggling to integrate AI effectively into existing workflows.

Aditya Challapally, lead author of MIT’s NANDA initiative, said the failures stem less from regulatory or technical limits and more from what he called a “learning gap.” Generic models like ChatGPT may work well for individuals, but they falter in enterprises when they aren’t tailored to specific processes. “Startups led by 19- or 20-year-olds have jumped from zero to $20 million in a year because they focus, execute well, and partner smartly,” he explained, while noting that many big firms are wasting budgets on sales tools rather than fixing operational bottlenecks.

The findings arrive as OpenAI CEO Sam Altman has also begun sounding alarms about AI market exuberance. Speaking with reporters last week, Altman compared current investor enthusiasm to the late-1990s dot-com bubble, warning that while AI is undoubtedly transformative, too much speculative capital is chasing companies with shaky fundamentals. “Are we in a phase where investors are overexcited about AI? My opinion is yes. Is AI the most important thing to happen in a very long time? Also yes,” he said.

Still, Altman’s caution hasn’t slowed investor appetite for OpenAI itself. The company, now valued around $500 billion following a planned $6 billion secondary sale, is generating strong recurring revenue but remains unprofitable. Analysts warn the tension between soaring valuations and widespread implementation struggles could define the AI sector for years to come. As MIT’s report and Altman’s remarks both suggest, the next phase of AI may hinge less on lofty promises and more on bridging the gap between excitement and execution.

• Billions Won’t Fix Intel’s Bigger Problems

Intel’s stock jumped 7% on Tuesday after SoftBank revealed a $2 billion investment in the chipmaker, adding to speculation that the Trump administration could also step in with a stake of up to 10%. Treasury Secretary Scott Bessent confirmed the government is considering converting $10.9 billion in CHIPS Act grants into equity, though he didn’t say how much of the company Washington would own. For Intel, the outside support provides a short-term boost, but it doesn’t erase the structural challenges weighing it down.

Once the leader in semiconductors, Intel has slipped behind in nearly every major market. Its PC chip business is losing ground to AMD and Qualcomm, its manufacturing arm is bleeding cash, and it trails both AMD and Nvidia in the AI race. The company’s market value has been cut in half since 2021, and new CEO Lip-Bu Tan has already announced layoffs and scrapped expansion plans. Still, as the only U.S.-based producer of leading-edge chips, Intel remains strategically important in America’s effort to secure domestic chip production.

Analysts are split on whether new investments can meaningfully change Intel’s trajectory. Deutsche Bank’s Ross Seymore sees the backing as a sign Tan is taking bold steps to stabilize the company. Others are skeptical: Loop Capital’s Gary Mobley warned that new investors don’t guarantee new customers, while Bernstein’s Stacy Rasgon argued Intel’s problems aren’t about money but execution. Intel’s foundry business, meant to rival TSMC, has struggled to land clients, and delays to its next-generation chip designs highlight the uphill climb ahead.

That leaves Intel with powerful partners but daunting needs. SoftBank’s cash and potential government backing may steady the company in the short run, but analysts estimate Intel could require tens of billions more to fund its ambitions. As Patrick Moorhead of Moor Insights put it, Washington may have just “made Intel the king,” but lasting success will depend on whether the company can innovate its way back to relevance before government support becomes more of a burden than a benefit. Reuters 

• Google Puts AI in the Spotlight With New Pixel Phones

Google used its annual “Made by Google” event in New York to make one thing clear: this year, it’s all about AI. The company unveiled its latest Pixel 10 smartphones and a handful of new gadgets, but the focus wasn’t really on hardware specs. Instead, Google leaned heavily into showing how its Gemini AI model can make everyday tasks easier using celebrity cameos from the Jonas Brothers and Jimmy Fallon to drive home the point that AI isn’t just for tech enthusiasts anymore.

Hardware updates were modest compared to last year’s big refresh. The Pixel 10 lineup features the same familiar design, with a new telephoto lens on the base model and flat pricing starting at $799. All models run on the new Tensor G5 processor and introduce “Pixelsnap,” Google’s take on Apple’s MagSafe charging system. But the real draw was software: AI-powered features like a photo “coach” in the camera app, real-time translation for phone calls, and an assistant that surfaces relevant info before users even ask. As Google’s devices chief Rick Osterloh put it, “It’s not just about the hardware anymore.”

Still, the Pixel brand faces challenges. Despite Android powering more than 80% of smartphones globally, Google’s own devices account for a sliver of sales compared to Samsung or Xiaomi. Market share actually slipped in the U.S. last quarter, and globally Pixel holds just 1.1%, according to IDC. Analysts say this year’s event felt less about pushing hardware innovation and more about marketing Google’s AI vision to a broader audience. “The opportunity of the addressable market is still what’s holding Google back,” said Creative Strategies analyst Carolina Milanesi, pointing to the company’s limited reach outside the U.S., Japan, and the U.K.

Google hopes to change that with new markets like Mexico and an expanded ecosystem of devices, including the Pixel Watch 4 and updated Pixel Buds. Whether that will be enough to move the needle remains to be seen. For now, Google’s strategy seems clear: rather than trying to outdo Apple or Samsung on hardware alone, it wants to make AI the reason people buy a Pixel. Bloomberg 

• JPMorgan, MUFG in Talks to Back $22B Texas Data Center Project

Two of the world’s biggest banks, JPMorgan Chase and Japan’s MUFG are reportedly in advanced talks to help finance a massive new data center campus in Texas. According to the Financial Times, the lenders are looking to underwrite a $22 billion loan for the project, which will be developed by Vantage Data Centers, a firm backed by private equity players Silver Lake and DigitalBridge. Neither the banks nor the developers have commented publicly yet.

The size of the deal underscores just how hot the data center market has become. With artificial intelligence tools like ChatGPT and other large language models gobbling up computing power, demand for high-performance infrastructure has surged. Analysts expect that trend to continue, and real estate firm JLL recently projected that the market capitalization of the sector will grow 161% between 2019 and 2025.

For investors, data centers are now considered among the most attractive types of commercial property. They offer a rare combination of insatiable tenant demand, tight supply, and rising rents a sweet spot for yield-hungry capital. Silver Lake and DigitalBridge are reportedly putting in $3 billion of their own equity to jumpstart the Texas buildout, which would be one of the largest of its kind.

Texas, with its low electricity costs and growing tech footprint, has become a magnet for these kinds of projects. If the deal goes through, it would mark one of the biggest single financings in the data center space and another sign that Wall Street sees digital infrastructure as a long-term growth story. Reuters 

• Nasdaq, S&P 500 Slip as Investors Rotate Out of Tech

U.S. stocks ended mixed on Wednesday, with the Nasdaq and S&P 500 edging lower as investors sold off tech names and rotated into less expensive sectors. The shift comes just ahead of the Federal Reserve’s Jackson Hole symposium, where Chair Jerome Powell is set to deliver a closely watched speech on Friday.

Tech shares, which fueled much of Wall Street’s rebound from the April selloff, have been under pressure. The S&P 500 technology index fell on the day, while sectors like energy, healthcare, and consumer staples gained ground. “A broader lens tells you it’s more of a rotation than a true sell-off,” said Bryant van Cronkhite of Allspring, noting stretched tech valuations and overlooked opportunities elsewhere in the market.

The pullback in megacap growth stocks was amplified by recent caution around artificial intelligence. OpenAI’s Sam Altman warned last week that AI-related stocks may be in a bubble, while an MIT study suggested many firms are struggling to turn

AI investments into profits. Chipmakers Nvidia, AMD, Intel, and Micron all fell amid fresh worries about government intervention, after the Trump administration signaled interest in taking equity stakes in semiconductor firms. Apple and Meta also declined, with Nvidia’s results next week seen as a key test for AI demand.

At the close, the Nasdaq Composite lost 0.68%, the S&P 500 slipped 0.26%, and the Dow finished flat. Investors are also watching for big retailer earnings, which serve as a pulse check on consumer spending. Target dropped after naming a new CEO while sticking to lowered forecasts, and Estee Lauder slumped as tariffs weighed on its outlook. With Powell’s Jackson Hole remarks looming and political pressure on the Fed intensifying, markets remain in a cautious, wait-and-see mode. Yahoo.Finance 

Minor headlines 

• Russia to Require Pre-Installation of State-Backed WhatsApp Rival on All Devices. Reuters

• Duolingo Confirms Departure of Social Media Head Zaria Parvez. CNBC 

• Hertz to Begin Selling Used Cars Through Amazon. Yahoo.Finance 

• Target Names Former Intern as New CEO. Yahoo.Finance 

• China’s DeepSeek Unveils Upgraded AI Model. Reuters

• Nazara Tech Faces Record Two-Day Slide After India Targets Online Money Games. Yahoo.Finance 

• J&J Commits $2 Billion to Expand U.S. Manufacturing Ahead of Drug Tariffs. Yahoo.Finance 

• Disney Launches Standalone ESPN Streaming Service, Marking Shift for Sports and Cable Bundles. Yahoo.Finance 

• US Tech Stocks Slip, Highlighting Fragility of AI Rally. Bloomberg