Shlomo Kramer, CEO of cybersecurity firm Cato Networks, has issued a stark warning that the artificial intelligence industry is experiencing a bubble reminiscent of the dot-com crash. In an interview with Business Insider, Kramer stated unequivocally: “We are in a bubble,” citing the disconnect between massive AI investments and actual returns.
Kramer argues that the bubble is being fueled by high investment levels and early profit gains from AI technologies, which are encouraging companies to continue investing at an unsustainable pace to maintain market valuations. “There’s a dislocation there; it’s big and it’s going to unwind,” the CEO warned, suggesting that while he believes in AI’s capabilities, the current investment trajectory doesn’t match the realistic rate of return.
The cybersecurity executive provided concrete examples of AI’s current limitations across various business functions. In customer support, Kramer noted that while AI can add value, it cannot fully replace human workers. AI may handle first-level support, but that’s not where companies face their highest costs. Similarly, in engineering departments, he sees AI providing only “modest” impact currently, potentially increasing effectiveness in specific situations but unable to replace engineers entirely.
Kramer also challenged corporate narratives around AI-driven layoffs, stating: “I highly suspect that all these companies that said that they are firing engineers because they now have AI actually used AI as a cover story.” He noted that despite some claims, he’s not observing companies actually cutting back on engineers due to AI implementation. This observation aligns with data showing that while entry-level engineering roles may be declining, many companies continue hiring engineers during the AI boom, with firms like Cloudflare even expanding internship programs.
The Cato Networks CEO joins a growing debate among industry leaders about the sustainability of current AI investments. Nvidia’s CEO has denied bubble concerns, while Mark Zuckerberg argues the bigger risk is underinvestment. Interestingly, even OpenAI’s Sam Altman, who sparked the AI revolution with ChatGPT, has admitted investors are “overexcited about AI.” Kramer’s assessment: AI advancement will happen “at a much slower pace than right now,” and when evaluating AI across organizational departments, his conclusion is simply “not yet.”
Key Quotes
We are in a bubble. There’s a dislocation there; it’s big and it’s going to unwind.
Shlomo Kramer, CEO of Cato Networks, directly stated his belief that the AI industry is experiencing an unsustainable bubble driven by the disconnect between high investments and actual returns, warning of an inevitable market correction.
It’s going to happen at a much slower pace than right now.
Kramer’s assessment of AI advancement timelines suggests that the technology will develop more gradually than current market enthusiasm implies, tempering expectations for rapid transformation across industries.
I highly suspect that all these companies that said that they are firing engineers because they now have AI actually used AI as a cover story.
The CEO challenged corporate narratives around AI-driven layoffs, suggesting companies are using AI as justification for workforce reductions that aren’t actually related to AI capabilities, revealing a gap between AI rhetoric and reality.
It’s simply not there yet.
When assessing AI’s current capabilities across organizational departments, Kramer’s blunt conclusion emphasizes that despite the hype, AI technology hasn’t reached the maturity level needed to deliver on many of the transformative promises being made by investors and companies.
Our Take
Kramer’s bubble warning deserves serious attention because it comes from someone with both technical credibility and direct market exposure. Unlike pure financial analysts, he’s observing actual AI implementation at the enterprise level, where the gap between promise and performance becomes evident. His point about AI being used as a “cover story” for layoffs is particularly insightful—it reveals how AI hype can be weaponized for purposes unrelated to the technology itself. The split among industry leaders (Nvidia’s denial versus Altman’s caution) suggests we’re at an inflection point where honest assessment is needed. The parallel to dot-com is apt: transformative technology, genuine potential, but irrational exuberance in valuations. The key difference may be that AI has demonstrated more concrete capabilities earlier, but Kramer’s “not yet” assessment suggests the timeline to profitability is longer than markets are pricing in. This could mean a correction without completely derailing AI’s long-term trajectory.
Why This Matters
This warning from a prominent cybersecurity CEO carries significant weight for the AI industry and broader technology sector. Kramer’s perspective matters because Cato Networks specializes in securing digital and AI transformation, giving him direct visibility into how organizations are actually implementing AI versus how they’re talking about it. His bubble warning echoes concerns that inflated valuations could lead to a market correction similar to the dot-com crash, potentially affecting billions in investments and thousands of jobs.
The implications extend beyond stock prices. If Kramer is correct that AI’s practical impact is being overstated, companies may face a reckoning between expectations and reality. His observation that AI is being used as a “cover story” for layoffs suggests potential misuse of the technology narrative for cost-cutting measures unrelated to actual AI capabilities. For investors, this signals caution in AI valuations; for workers, it suggests job displacement fears may be overblown in the near term; and for businesses, it highlights the need for realistic AI implementation timelines rather than rushed deployments driven by market pressure.
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Source: https://www.businessinsider.com/cato-networks-ceo-says-in-ai-bubble-2025-12