This reflects a clear shift in how businesses are coming to perceive artificial intelligence: it is no longer just a quirky innovation or a simple automation tool. Today, many companies can see AI as a key driver of customer engagement and transformation of work processes. And if they wish to stay competitive in an increasingly AI-driven world, they, too, have to embrace this technology.

As 2025 draws closer, there is one question that’s on everybody’s minds: will the surge in AI startups continue in the coming year? And, if so, how will AI evolve beyond the current hype?

Well, let’s try to figure it out, shall we?

The promise of AI in 2025

Let’s try to get the easy part out of the way first. Will AI startups continue to rise next year? The answer is a definite “yes”. From what we can see in the market today, the momentum behind artificial intelligence shows no signs of slowing.

Startups that deal with this tech continue to attract billions in funding – over $20 billion over the three quarters of 2024, according to S&P Global. This gives them all the resources they need to continue scaling and exploring new solutions. And there are many predictions out there that point to this market’s continued expansion, driven by the tangible benefits and diverse applications that artificial intelligence can offer across industries.

The AI market is expected to contribute almost $16 trillion to the global economy by 2030. From generative tools like ChatGPT to AI-driven video and music creation, and niche professional applications, the use of this technology is growing at an extraordinary pace across industries. Startups are leveraging this potential to tackle challenges previously deemed insurmountable.

But, of course, it won’t all be sunshine and rainbows.

The perils of AI-washing and how the market can overcome it

The rise of “AI-washing” has sorely undermined the credibility of AI in 2024. For every company that genuinely pursued innovation, there were at least three that tried to use the label of AI for the sake of self-promotion, often exaggerating their actual use cases with the technology.

Even a basic customer support chatbot might be touted as cutting-edge AI, but that doesn’t make it true. And any business following this trend not only misleads customers and damages trust industry-wide, but also diverts resources that could otherwise go toward projects that can actually contribute new value.

Not to mention that developers are now increasingly required to prove the worth of their AI products because of all the exaggerated claims. On the one hand, this can help with the maturation of the whole market, as meaningful contributors get to go ahead while everyone else gets left behind. But on the other hand, this skepticism has a way of slowing down even those real contributors, hampering the industry’s development.

How do we solve this problem, you might ask? The way I see it, businesses must adopt a problem-first approach. Before jumping on the “integrate AI” train, they need to stop for a moment and consider what specific challenges artificial intelligence can help them solve. If there are no clear and definitive benefits that a company can identify, then it can only mean that AI isn’t really necessary for its operations.

This is particularly important if you are an SMB or a startup with limited resources: you can’t afford to waste time, money, and effort on random ideas when you don’t have any certainty that they will pan out. It’s not about riding the hype but making investments sensibly, in a way that aligns with your long-term strategic goals.

The changing face of AI implementation in 2025

That said, even with AI washing addressed, that doesn’t mean that the general hype surrounding AI will go away. On the contrary, it will likely keep going strong. But based on everything we’ve discussed so far, it also means that the coming year is also going to be the time when the technology is going to finally go beyond the hype.

According to Gartner’s Hype Cycle, technological trends often experience a downturn after reaching the “peak of inflated expectations.” For artificial intelligence, Gartner places this phase precisely at 2024, which means 2025 is going to see a correction in how AI is perceived and marketed. But that doesn’t mean that the technology itself will somehow lose its potential and relevance.

The world has seen tech bubbles before, and when they burst, it’s not like the technologies behind them disappeared – they just became more manageable in terms of expectations. As less viable projects fall by the wayside, we can expect the main focus will shift toward AI applications that deliver genuine value. AI-based advancements in predictive analytics, client personalisation, and operational optimisation will contribute a lot in industries like e-commerce, healthcare, compliance, and many others.

The AI investment landscape may grow more cautious (as it only makes sense), but startups that use AI to address real-life problems will still be able to find their way and thrive.

Regulation and its impact on AI in 2025

Like with any industry, regulations will play a pivotal role in shaping AI’s trajectory in the coming year and beyond. And in this sense, regulatory advancements are going to be akin to a double-edged sword.

On the one hand, enforcing the ethical use of AI will help prevent practices like AI-driven manipulation or unauthorised surveillance. And having clear, consistent guidelines will help build greater trust in the whole industry, ultimately benefiting all its serious players.

At the same time, though, regulations could also slow development, particularly for startups with limited funds. Compliance has never been a simple topic for small-time businesses, and if it becomes even more stringent, many startups may struggle to allocate resources to keep up with the perpetual changes.

Beyond that, differences between jurisdictions will also have a role to play: countries with less stringent regulatory demands could gain a competitive edge, leading to uneven AI development across regions.

Ultimately, regulatory bodies will have to find a way to balance their approaches in such a way as to mitigate risks without stifling innovation.

Final thoughts: a promising future beyond the hype

When looking at the startup landscape as a whole, I find it doubtful that the presence of AI will become the defining factor in their success in 2025. But it will definitely play a critical role in one way or another. Startups that harness AI effectively can accelerate their operations in any number of ways, from product development to improved data management to better customer interactions. All these capabilities are invaluable for resource-constrained startups looking to cut costs and get an extra boost.

However, success will depend on integrating artificial intelligence thoughtfully, with a focus on solving real problems rather than chasing trends. As the AI landscape matures, businesses must move beyond the buzzwords and into a future where AI is a big, but not overhyped, component of their strategy.

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