The AI Bubble Burst: What Procurement Needs to Prepare For

AI has been hyped as the solution to almost every challenge, fuelled by a kind of technosolutionism: the belief that technology alone can fix complex problems. But as markets mature, we start to see whether hype actually meets reality.

Overvaluations correct, unsustainable business models collapse, and weaker suppliers exit. We see the early warnings of the AI bubble burst.

Hype vs. Reality

The AI sector has seen huge levels of investment and expectation. Startups with limited real-world traction have been valued like global players.

A striking example is Forward Health, a U.S. healthcare startup that raised around $400 million to build a vision of AI-powered clinics and CarePods designed to automate routine check-ups. Despite its unicorn status in 2021, Forward abruptly shut down in 2025 after struggling to sustain revenue and operations (Maginative).

200 staff members lost their jobs overnight.

Part of the problem was that Forward overestimated both technology’s ability and society’s appetite to replace the human side of healthcare. As one analysis put it:

“Forward missed the fact that healthcare is a service: not because it has to be, but because patients want it to be.” Rezilient Health

Patients do not simply want automation; they want reassurance, empathy, and trust. Another observation captured this disconnect vividly:

“Nobody likes going into a cold, empty room when they’re full of anxiety about their or their loved one’s health.” Rezilient Health

The Forward story highlights the gap between hype and reality. Investors pulled back, customers lost confidence, and procurement teams were left exposed to supplier instability.

Positive: A Stronger Market

There is an upside to a bubble burst. It often clears the market of hype and leaves behind more robust, legitimate suppliers with proven business models, sustainable operations, and technologies that really work. For buyers, this can mean a healthier and more reliable ecosystem in the long run.

Negative: Continuity Risks

The downside is sharper. Critical services can fold suddenly if suppliers collapse or investors withdraw. This creates continuity risks for organisations that depend on these systems. Contracts may be terminated with little warning, support can vanish overnight, and data portability may be limited.

For procurement professionals, the risk is not just technical. It is operational and reputational.

If a supplier folds, the consequences are immediate.

What Procurement Teams Must Do

Procurement cannot prevent a market correction, but it can protect organisations from the worst impacts. Practical steps include:

• Assess financial stability: Do not just evaluate the technology. Check funding sources, revenue models, and investor dependency.

• Scrutinise sustainability: Ask whether the supplier has a credible long-term plan for operations, not just short-term hype. How will they scale up?

• Build continuity safeguards: Ensure contracts cover exit plans, data portability, and contingency support.

• Diversify supplier risk: Avoid over-reliance on a single AI vendor in critical areas.

The AI bubble burst is not the end of AI. It is a correction. Procurement teams who balance optimism with due diligence can emerge stronger, with more resilient suppliers and safer contracts. But ignoring the risks could leave organisations exposed to sudden and damaging service disruption.

This is the third blog in our series on AI risks in procurement. Together, we have explored AI washing, AI laundering, and the AI bubble burst - three trends every procurement team must understand.

We will also be tackling these issues in detail at our December event, Scrutinising AI Systems Effectively. Join us if you want practical tools to navigate the hype, pressure-test supplier claims, and protect your procurement decisions.

Emma Kitcher, AI Nerd and Founder of CLEAN AI