The AI sector has been experiencing a rapid growth trajectory, fueled by significant investments and the availability of powerful computing infrastructure. However, this has raised concerns about the sustainability of the current growth trajectory. A potential slowdown in the AI sector, often referred to as a "bursting bubble," could actually benefit the technology industry, according to economists.

As funding for AI ventures begins to decrease, companies will face increased pressure to develop more efficient AI models – those that deliver greater performance using fewer computing resources and less energy. This shift towards greater efficiency is a natural consequence of reduced investment. When capital is readily available, companies may prioritize rapid expansion and experimentation, sometimes at the expense of optimizing resource utilization. However, with funding becoming more constrained, the focus will inevitably turn to maximizing the value extracted from each dollar spent on hardware and power.

Economists have identified this phenomenon, where innovation is driven by limited resources, as "directed technical change." This concept suggests that scarcity encourages businesses to find creative solutions to overcome constraints, ultimately leading to technological advancements that might not have occurred otherwise. In the context of AI, this could mean developing more sophisticated algorithms that require less computational power, or exploring alternative hardware architectures that offer improved energy efficiency. The current AI boom has been fueled by significant investments and the availability of powerful computing infrastructure, but a period of consolidation and increased efficiency could pave the way for more robust and long-term development in the field, ensuring that AI technologies are accessible and environmentally responsible.