Zoho’s Sridhar Vembu flags AI investment frenzy – Firstpost

Zoho founder Sridhar Vembu cautioned that the artificial intelligence boom may be entering an overheated investment phase, describing it as potentially the “biggest bubble yet” among modern technology cycles, even as he stressed that the underlying technology itself remains fundamentally real.

In a post on X on Sunday, Vembu argued that periods of rapid technological change often coincide with sharp financial excesses. The existence of a bubble, he noted, does not diminish the importance or legitimacy of the underlying innovation.

“AI is clearly an investment bubble,” he wrote. “All massive tech waves spark financial bubbles, so saying it is a bubble doesn’t negate the tech itself. And this one is the biggest bubble yet. How to navigate this without losing one’s shirt is the key.”

AI is clearly an investment bubble. The justification is that all massive tech waves spark financial bubbles so saying it is a bubble doesn’t negate the tech itself. And this one is the biggest bubble yet.

How to navigate this without losing one’s shirt is the key. https://t.co/PdpWEJrnaB

— Sridhar Vembu (@svembu) May 24, 2026

His comments add to a growing global debate over whether the current wave of artificial intelligence investment is being driven by sustainable end-user demand or by aggressive capital flows, circular financing structures and inflated expectations around future earnings.

Vembu’s remarks were prompted by a widely circulated post from Bull Theory, which questioned the financial foundations of the AI industry’s rapid expansion.

The post alleged that a significant portion of projected cloud computing demand across major technology companies may be concentrated among a small number of AI firms, particularly OpenAI and Anthropic. It further suggested that large technology groups such as Microsoft, Amazon, Google and Oracle could be recognising revenues tied to internalised or indirectly funded usage rather than purely external demand.

At the centre of the argument is the structure of several high-value partnerships in the AI ecosystem, where investments are often paired with cloud service credits, infrastructure commitments, or long-term compute agreements.

The post pointed to Microsoft’s investment in OpenAI, arguing that portions of the funding were effectively returned as cloud credits, which were then used to purchase computing capacity on Microsoft’s own servers. This, it claimed, raises questions over whether some of the reported cloud revenue reflects genuine third-party demand or internally financed consumption.

It also made similar assertions regarding Anthropic’s spending on Amazon Web Services, suggesting that the startup’s infrastructure costs account for a substantial portion of its revenue base, highlighting what it described as a “feedback loop” between funding and cloud spending.

Bigger questions for investors

While Vembu did not directly address the specific financial claims made in the viral post, his intervention adds to rising scrutiny over how AI revenues are being recorded, how infrastructure spending is being financed, and how sustainable current growth trajectories may prove to be.

The broader concern among analysts is not whether AI represents a genuine technological shift — few dispute that — but whether current valuations and investment flows are running ahead of monetisation reality.

As capital continues to pour into AI startups and cloud infrastructure providers, the central question remains whether the sector is laying the foundation for a durable economic transformation or inflating what could become the most capital-intensive bubble of the digital era.