TURIN, Italy — Artificial intelligence is currently in an “industrial bubble” but the technology is “real” and will bring big benefits to society, Amazon Founder Jeff Bezos said on Friday.

The term bubble usually refers to a period of inflated stock prices or valuations of companies that have disconnected from the fundamentals of a business. One of the most famous bubbles that burst was the 2000 dotcom crash where the value of internet companies plummeted.

Exor CEO John Elkann asked Bezos on stage at Italian Tech Week in Turin, Italy whether there were signs that the current AI industry is in bubble.

“This is a kind of industrial bubble,” the Amazon founder said.

Bezos laid out some of the key characteristics of bubbles, noting that when they happen, stock prices are “disconnected from the fundamentals” of a business.

“The second thing that happens is that people get very excited like they are today about artificial intelligence,” Bezos added.

During bubbles, every experiment or idea gets funded, he told the audience.

“The good ideas and the bad ideas. And investors have a hard time in the middle of this excitement, distinguishing between the good ideas and the bad ideas. And that’s also probably happening today,” Bezos said.

“But that doesn’t mean anything that is happening isn’t real. AI is real, and it is going to change every industry.”

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Artificial intelligence companies are the hottest ticket items in today’s startup ecosystem but the pace of change is dominated by developments at OpenAI and Anthropic. For startups building on top of their models, it’s sink or swim. 

With the U.S. currently surging ahead in the large language model (LLM) race, which demands huge checks, Europe’s opportunity lies in building tools that make AI useful, which is known as the application layer.

“That’s also where we think most of the profit will be made in the future,” Robert Lacher, a founding partner of Visionaries Club, told CNBC’s “Squawk Box Europe” earlier this year. 

Generative AI companies clinched $49.2 billion in venture capital (VC) investment in the first half of 2025, surpassing 2024’s $44.2 billion across the whole year, according to consultancy EY. The U.S. is responsible for the majority of that, accounting for 97% of deal value and 62% of volume; Europe represented just 2% of value, but 23% of volume. 

Risk appetite among VC investors on the continent is typically lower than in the U.S., while market fragmentation has long caused challenges for startups looking to scale quickly. Hungover from the 2021 tech boom and amid an economic downturn, steady growth and sound business metrics have also come back into focus in Europe. AI is still drawing eyeballs but it pales in comparison to the U.S. 

Now, frequent updates of AI models like OpenAI’s ChatGPT and Anthropic’s Claude are pushing companies built on top of them to iterate faster or risk falling behind.

Europe does have its own LLM company – Mistral, the French startup that has raised 1.7 billion euros ($2 billion) in capital so far, including from Dutch chipmaker ASML – that is positioned as an open-source competitor to OpenAI, but there’s still a lot of ground to cover.

“The speed of innovation, speed of product velocity, speed of distribution, actually ends up winning over everything else,” Bryan Kim, a partner at VC firm Andreessen Horowitz, told CNBC’s “Squawk Box Europe” on Thursday from Italian Tech Week.

Sweden’s Lovable, a “vibe-coding” platform that enables others to build apps and websites with AI, and AI agent startup Sana are examples of such companies putting AI to use. Meanwhile, London’s AI video generation startup Synthesia and synthetic audio company ElevenLabs, also have specific AI applications. The latter did, however, later build its own LLM. 

But “what does it mean when the product and technology you’re actually relying on changes every month. How do you move any slower than that and expect to win the game?” Kim said.

“What I came around with is, actually, momentum is the moat at this current juncture of AI development. Maybe we’ll get to a point where the model layer stabilizes it a little bit, and then we could talk about other things, but, right now, momentum is the only moat that I see,” he added.

Indeed, British AI cloud company Nscale just nabbed $433 million in new funding, hot on the heels of a $1.1 billion Series B – the largest in Europe – announced just days ago. However, like Mistral, Nscale is an AI infrastructure play rather than application layer – a timely development as AI sovereignty continues to grab political and investor attention. 

For Lovable CEO Anton Osika, it’s much more simple. “The only thing we need to do in Europe is change our mindset that it is possible,” he told “Squawk Box Europe” on Tuesday.

“Traditionally it has been more of a constraint with access to the amount of technical talent, of access to capital, that is not the bottleneck anymore,” he argued. 

Osika’s own company, for example, can act as a CEO’s technical cofounder if they need one. Meanwhile, Lovable is also luring top talent from the U.S. to Sweden to work at the startup, Osika said. 

He added: “It’s much faster for us to hire in Europe than it is to do so for U.S. counterparts, where there’s 1,000 more companies like Lovable, so it is a competitive advantage to be building from Europe.”

A wave of defense tech startups in Silicon Valley is drawing billions in funding and reshaping America’s national security.

Anduril Industries, recently valued at $30.5 billion following its latest funding round, is among the so-called “neoprimes” — companies challenging the dominance of legacy contractors, dubbed “primes,” such as Lockheed Martin, Northrop Grumman, Boeing, General Dynamics, and RTX (formerly Raytheon).

“There’s more money than ever going to what we call the ‘neoprimes'” Jameson Darby, co-founder and director of autonomy at investment syndicate MilVet Angels, or MVA, told CNBC. “It’s still a fraction of the overall budget, but the trend is all positive.”

Other examples of defense tech startups challenging the incumbents include SpaceX and Palantir Technologies, said Darby, who is also a founding member of the U.S. Department of Defense’s Defense Innovation Unit.

Unlike the primes, these startups are faster, leaner and software-first — with many of them building things that can help close “critical technology gaps that are really important to national security,” said Ernestine Fu Mak, co-founder of MVA and founder of Brave Capital, a venture capital firm.

Venture funding for U.S.-based defense tech startups totaled about $38 billion through the first half of 2025, and could exceed its 2021 peak if the pace remains constant for the rest of the year, according to JPMorgan.

As the global war landscape changed over the past decades, the U.S. Department of Defense has identified several technologies that are critical to national security, including hypersonics, energy resilience, space technology, integrated sensing and cyber.

“In a post-9/11 world, the entire Department of Defense effectively focused on … the global war on terrorism. It was our military versus insurgents, guerrillas, asymmetric warfare, relatively low-tech fighters in most cases,” said Darby.

But war today is more focused on “great power competition,” said Mak.

“The focus is more on deterring and competing with [adversaries] in these very high-tech, multi-domain conflicts,” Mak added. “The battlefield is changing and new technologies are needed… warfare no longer being limited to land, sea, air. There’s also cyber and space domains that have become contested.”

Today, some of these Silicon Valley “neoprimes” are developing not just weapons, but also dual-use technologies that can be applied both commercially and by militaries.

“So things like artificial intelligence and autonomy have broad, sweeping commercial applications, but they’re also clearly a force multiplier in a military context,” said Darby. “[The] Department of War is rapidly assessing and adopting these dual-use technologies … they’re sending signals to the investment world, to the defense industrial base, that the U.S. government needs these things.”

That direction from the government has, in turn, provided a clear and strategic roadmap for both investors and entrepreneurs, said Mak.

Today, Mak says the syndicate’s roughly 250 members include tech founders, Wall Street financiers, company executives, intelligence officials, former military leaders and Navy SEALs. Together, they’ve invested in companies like Anduril Industries, Shield AI, Hermeus, Ursa Major and Aetherflux.

“Overall, we believe that ‘neoprimes’ cannot exist in the abstract. They require people — individuals who bring technical expertise, who carry a deep sense of mission, and who contribute complementary voices and talents. Together, this coalition forms what we are convening and calling the ‘new guard,'” said Mak.

She added that modern national security requires both the “warrior’s insight on the battlefield” and the “builder’s drive for innovation”.

“Working together with engaged, informed patriots whose participation strengthens our defense ecosystem and reinforces the very fabric of national security,” Mak said.

Mak and Darby both agree that as new technologies develop and make their way onto battlefields globally, it’s changing the way militaries fight, which can also pose new threats.

“You’re seeing these technologists, these builders … building defense tech, and the reason why they’re doing so, is not to initiate conflict, but rather to create a credible deterrent that discourages aggression,” said Mak.

“No one in defense tech is looking to wage war, rather, it’s looking to deter it and wanting adversaries to think twice before threatening peace and stability,” Mak added.