Is the AI bubble bursting? Naturally, most eyes are on the movements of the world’s biggest tech firms – the OpenAIs, the Microsofts, the Nvidias. These are, after all, where a large share of AI investment has been deployed. But for the earliest tell-tale signs, it’s worth looking a lot further down the food chain.

Big AI firms burn through cash much faster, but they are also sitting on plenty of unused capital and have investors with deep pockets. Some of the smaller AI startups, on the other hand, are on much shakier ground.

They are confronted with two main problems. First, they were the beneficiaries of a huge splurge of speculative VC and angel investor money a couple of years ago. When AI hype was at its peak, investors adopted a “spray and pray” approach: throw money at anything with AI in the name, and see what sticks. Due diligence went out the window.

Two years on, said startups are still well away from hitting profitability, but investors need much more persuasion to part with their cash. It’s survival of the fittest.

Second, the big AI companies have become so big – and so broad in their capabilities – that they have cannibalised many of the product offerings of their smaller peers. Startup founders are either hoping they’ll be snapped up by one........

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