Three Harsh Truths About the AI Industry in 2026

Recently, I chatted with friends working in AI. Surprisingly, we all shared the same sentiment: while the AI industry looks glamorous on the surface in 2026, there’s turbulence beneath.

Let me share some numbers. OpenAI raised $122 billion. Anthropic’s annualized revenue exceeded $30 billion. The industry seems to be thriving. But at the same time, Meta laid off 15% of its AI division. Google froze hiring for some AI projects. A major domestic tech company reportedly “optimized” its entire large model team.

This “fire and ice” situation reveals the first harsh truth: money is concentrating at the top, while smaller players struggle to survive.

The second truth: the price war hasn’t ended—it’s just taken a different form.

Early this year, vendors were openly competing on price, with API costs dropping continuously. Now, the battlefield has shifted to “hidden costs”—whose service is more stable, whose response is faster, whose support is better. These invisible competitions often cost more than visible price cuts.

The third truth might be more surprising: technological superiority doesn’t equal commercial success.

I’ve seen too many technically strong teams fail to build viable products. Some had wrong market positioning. Others had terrible user experience. Some simply had unsustainable business models. The technical barrier in AI is dropping rapidly, but product and operational capabilities remain scarce resources.

Honestly, as a former algorithm engineer, I used to believe that good technology guarantees success. Now I understand—the AI industry has entered its second half. Pure technical advantages aren’t enough anymore. You need to understand product, market, users, and even capital operations.

For entrepreneurs wanting to enter AI, my advice is: stop fixating on foundation models—that battlefield is already a red ocean. Find pain points in vertical domains and solve specific problems with AI. That’s where opportunity still exists.

After all, it’s not the strongest that survive, but those most adaptable to change.