By Andrew Macken
AI is the defining force in today’s techno-political economy. It is driving around three-quarters of US GDP growth[1]. In just the last eight weeks alone it has sent the iShares Semiconductor ETF (SOXX) up by around 70%[2]. And narratives around mass disruptions of everything from software to human employees are rife.
It’s fair to say we are living in some kind of powerful hype-cycle around AI. The potential mega-IPOs of Anthropic, OpenAI, and SpaceX over the coming weeks and months have created an additional incentive to inflate expectations around the technology.
There is no doubt AI is clearly real and powerful. But to get some grounded perspective on how the AI hype cycle may play out, we consider a useful analogy in Dr Cameron Tracy’s work on the gap between the expectations and the reality of ‘revolutionary’ military technology: Technological Surprise and Normalization Through Use (2026).
From revolution to normalisation
When Dr Tracy, a Senior Research Scholar at the Berkeley Risk and Security Lab at the University of California, looked at the development of military technology, he found a pattern.
It turns out that history is littered with predictions of technological revolutions that, once they entered the battlefield, rapidly normalised.
Before chemical weapons were deployed, it was assumed there could be no defence against them. Yet, after extensive use in the First World War, these views quickly normalised: they became just another weapon, like explosives, that would be routinely deployed.
We are witnessing this pattern in the ongoing Russo-Ukrainian war around the use of Russian long-range precision-strike systems.
For example, the Kinzhal (Russian for ‘dagger’) hypersonic boost-glide missile has an operational range of approximately 500km, travels at speeds of Mach 5-10 (5-10 times the speed of sound), and generates lift through its flight to glide and manoeuvre through the atmosphere.
Since the Kinzhal was revealed in 2018, journalists, scholars and government officials said such hypersonic weapons were ‘game changers’. With their combination of speed and stealth making them impossible to intercept, experts believed they would revolutionise warfare.
Yet by the time they were first deployed against Ukraine in 2022, defence officials in the US and UK quickly revised these views and instead disclaimed the weapons were highly unlikely to materially affect the outcome of the war. The normalisation process had begun.
Fast-forward to May 4, 2023, and Ukrainian forces responded to a Kinzhal attack on Kyiv using a US-produced Patriot missile-defence system which intercepted the incoming missile. On May 16 the same year, the Ukrainians intercepted a volley of six incoming Kinzhals.
The narrative around Kinzhals was reshaped.
Drones were another technology framed as revolutionary. And yet, while they’ve proven effective in many recent conflicts, including the Russo-Ukrainian War, most experts now agree they simply represent the latest evolution of continual competition between air defences and penetration tools.
Reversion to the norm (is the norm)
It appears that normalisation of technology expectations is the rule, not the exception.
Hype-cycles accompany all new weapons technologies. That’s in large part, Dr Tracy says, because proponents of a given technology are incentivised to make grandiose claims so as to attract attention and funding.
This rhymes with where investors are today in relation to AI.
When it comes to AI, as powerful as the technology is, we are also in a hype cycle. Anthropic’s Dario Amodei, warned that AI models such as Mythos are already too powerful to be released to the public[3]; and AI could wipe out half of all entry-level white-collar jobs.[4]
Meanwhile, OpenAI’s CFO recently referred to a “vertical wall of demand” they were seeing for their products.[5] Elon Musk believes SpaceX will soon be building orbital data centres.
It’s worth noting that many of AI’s loudest evangelists are also the ones with the most to gain from the hype.
Yet, as Dr Tracy’s analysis shows, expectations often normalise quickly when technology is deployed into the real world.
Already, we are seeing evidence of AI expectations normalising as it is deployed in the real world.
AI-driven military planning and command, for example, is expected to ‘revolutionise’ warfighting. Yet, according to Tracy, current evidence points to AI exhibiting a narrow intelligence. It has encyclopaedic empirical knowledge, yet is woefully ill-equipped in the relevant skills of command in war.
Or said another way, useful, but so far, normal.
Converging to facts on the ground
At the start of 2026, we witnessed the ‘SaaSpocalypse’ when the launch of AI agents triggered a huge sell-off of enterprise software firms. But already we are seeing expectations begin to normalise. After many months of the ‘SaaS-is-dead’ narrative, many of those making such claims are slowly walking back the claims.
In recent days, influential tech podcaster, Chamath Palihapitiya, observed that: “At the high end of the market, where all the action is, what people are finding is that this is a lot harder than we thought.”
He went on to argue that those with existing trusted distribution into enterprises, including Salesforce – which has sold off significantly this year – are the ones that will come out on top[6].
We would agree. In our recent whitepaper, ‘Where Advantages Lie (and Lie) in the Age of AI’, we highlighted the significant disconnect between how markets currently perceive AI disruption and what we are seeing on the ground.
Dr Tracy’s analysis further confirms for us that the most likely path forward for AI is that – as happens with ‘revolutionary’ technology – the hype will
Montaka’s response is to own businesses with competitive advantages that will continue to strengthen in the age of AI – and to do so while markets are still pricing them as though they won’t.
Note: Montaka is invested in Salesforce
[1] Bureau of Economic Analysis, Q1 2026
[2] Bloomberg
[3] (Anthropic) Assessing Claude Mythos Preview’s cybersecurity capabilities, April 2026
[4] (Axios) Behind the Curtain: A white-collar bloodbath, May 2025
[5] (Bloomberg) OpenAI CFO Sees ‘Vertical Wall of Demand’ for Products, April 2026
[6] (All In Podcast) Episode #273, May 2026
Andrew Macken is the Chief Investment Officer at Montaka Global Investments. To learn more about Montaka, please call +612 7202 0100 or leave us a line at montaka.com/contact-us
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