How are you defining “AI bubble”? Via the capability trajectory of AI or as an economic analysis. How is “AI bubble” an extreme? Was dotcom bubble an extreme? In retrospect it feels like a median position. Bubbles are super normal not extreme. “AI is useless and will go away” would be the extreme position. Your third possibility could happen in the “AI bubble” world.

I think “AI bubble” gets framed as a technological question about AI capabilities and not a financial one. The bubble may deflate slowly, but if you eat all software or eat all other Field’s something is popping. Anthropic OpenAI and SpaceX are all valued partially as if they’ll be the only ones to succeed.