Hugging Face CEO says we’re in an ‘LLM bubble,’ not an AI bubble

Hugging Face co-founder and CEO Clem Delangue believes the industry isn’t facing an overall “AI bubble,” but rather a more narrow “LLM bubble” — and he expects it could burst as early as next year. Speaking at an Axios event on Tuesday, Delangue said that while speculation around AI valuations is a “trillion-dollar question,” the future of artificial intelligence itself isn’t in danger.

According to him, it’s large language models — the systems behind tools like ChatGPT, Gemini, and other conversational AI products — that are currently absorbing most of the hype, attention, and investment.

“I think we’re in an LLM bubble, and I think the LLM bubble might be bursting next year,” Delangue said. “But ‘LLM’ is just a subset of AI. When it comes to applying AI to biology, chemistry, image, audio, [and] video, I think we’re at the beginning of it, and we’ll see much more in the next few years.”

He noted that the problem isn’t AI itself, but the perception that one giant, ultra-computationally expensive model can solve everything.

“I think all the attention, all the focus, all the money, is concentrated into this idea that you can build one model through a bunch of compute and that is going to solve all problems for all companies and all people,” he said. “The reality is that you’ll see a multiplicity of models — customized, specialized — solving different problems.”

To illustrate, Delangue pointed to a banking customer-service bot.

“You don’t need it to tell you about the meaning of life,” he joked. “You can use a smaller, more specialized model that’s cheaper, faster, and something you can run on your own infrastructure. That is the future of AI.”

Delangue acknowledged that a downturn in the LLM market could affect Hugging Face, but emphasized that the broader AI ecosystem is already diverse and far bigger than any single category. Even if valuations for LLM companies drop, he said, it won’t threaten the overall direction of the industry — or Hugging Face’s longer-term plans.

He also highlighted the company’s financial discipline, contrasting Hugging Face’s approach with that of many high-spending AI competitors.

Hugging Face still has roughly half of the $400 million it has raised sitting in the bank, Delangue said. “In AI standards, that’s called profitability,” he added. “The other guys — it’s not hundreds of millions they’re spending. It’s billions.”

Rather than rushing to keep pace with massive spending in the LLM arms race, Delangue said Hugging Face is intentionally choosing a more measured path.

“A lot of people right now are rushing or maybe even panicking and taking a really short-term approach to things,” he said. “I’ve been in AI for 15 years now, so I’ve seen cycles. We’re learning from that and trying to build a long-term, sustainable, impactful company for the world.”