Gartner warns agentic AI startups: Prepare to be consolidated

Gartner has signaled that the supply of "agentic AI" in terms of models, platforms, and products far outstrips demand, creating a situation that will lead to consolidation and market correction.

The analyst company expects the agentic AI market - based on LLM-powered models that perform tasks for humans - to consolidate in the short term as the last couple of years' hype and "fear of missing out" (FOMO) give way to fundamental economics.

Gartner's position follows the Bank of England's warning that there is a danger of a sudden correction in the financial markets, owing to the value of tech and AI stocks, citing some financial metrics that are comparable to the dotcom bubble of the late 1990s that led to a crash in early 2000. Equity markets might be "particularly exposed should expectations around the impact of AI become less optimistic," the Financial Policy Committee said.

IMF chief Kristalina Georgieva has also warned that market shocks could threaten global growth in light of recent valuations based on AI optimism. Recent weeks have seen leading vendors OpenAI, Nvidia, AMD, and Oracle forge complex, interdependent financial relationships as they strive to build the infrastructure required to fuel demand for AI. Consultancy Bain & Company, for example, estimates $500 billion a year is needed until 2030.

Gartner said that in a correction, the losers of consolidation would be undifferentiated AI companies and their investors, while the winners would be capital-rich incumbents with the resources to acquire promising technologies and talent.

"While we see early signs of market correction and consolidation, product leaders should recognize this as a regular part of the product life cycle, not a sign of inevitable economic crisis," said Will Sommer, senior director analyst at Gartner.

"The impending agentic AI market correction is distinct from speculative bubbles fueled by systemic financial engineering, fraud or policy. At this point, the underlying product, agentic AI, is sound, and the current market correction, where markets rationalize and consolidate, is a regular part of the product life cycle.

"However, a 'speculative bubble' could still form if investment becomes detached from agentic AI's intrinsic potential to deliver tangible and commensurate economic value.

"Over the longer term, consolidation will enable industry leaders to develop agentic products that meet the technical and business requirements of customers who are presently struggling to adopt AI agents." ®