Is artificial intelligence a bubble? That's the trillion-dollar question. Large language models (LLMs) like those that power OpenAI's ChatGPT are certainly impressive, capable of generating coherent text, images, and functional code. AI agents, which leverage LLMs to perform complex, multistep tasks, could be a huge deal as companies race to adopt the technology. Annual spending on AI infrastructure is on pace to surpass $200 billion, according to IDC, as tech giants throw caution to the wind.

While the AI boom is still going strong, there are a few reasons to believe that the industry is vastly overselling the capabilities of AI technology. LLMs can do a lot of things, but they may not be well suited for the kinds of real-world tasks that will ultimately generate revenue for companies.

Writing computer code is a great example. Top-tier LLMs can write impressive-looking code, but these models work by predicting the next token in a stream of tokens. There's no understanding or reasoning going on, just a convincing illusion. Some mistakes will be easy to catch, but others will be subtle and require the expertise of a senior engineer. For companies relying on LLMs to write mission-critical code, it's questionable whether the technology will actually reduce costs given its tendency to produce errors.

AI agents are another example. While the prospect of LLMs autonomously completing multistep tasks is enticing, this may be a case of stretching a technology well beyond its capabilities. OpenAI's Operator, an AI agent that can use a web browser to perform tasks, was called "brittle and occasionally erratic" by The New York Times last month. The brittleness is particularly concerning. If AI agents are brittle and prone to breaking down, they won't be any better than existing solutions.

A contrarian bet on a beaten-down stock

If you believe that AI is a bubble and that the technology won't be capable of fulfilling the wild claims being made by the industry, one way to bet against it is to invest in a company that is widely believed to be under threat from the AI revolution. Investors need to look no further than UiPath (PATH 1.11%).

UiPath specializes in robotic process automation. In a nutshell, UiPath's software robots perform repetitive rules-based tasks by emulating human actions. The software essentially records a task being completed so that it can be repeated autonomously. There are a wide range of use cases for this technology, including interfacing between applications that don't work well together natively.

Robotic process automation is exactly the kind of business that could potentially be destroyed by AI. UiPath has invested in AI and integrated it into its platform, but the need for such a platform could disappear under the worst-case scenario. Robotic process automation is itself somewhat brittle.

Imagine a set of actions that involves extracting text from an application. An application update that changes anything about how that text is presented could break the robot. In theory, an AI agent could be told what to do, "figure out" how to do it, and be resilient to minor changes.

That's the theory, anyway. In reality, it appears that AI agents may be just as brittle and sometimes more unreliable compared to a rules-based system like robotic process automation. AI isn't deterministic, meaning that the same prompt could yield different results. If a company needs some process to complete correctly 100% of the time without exception, AI just isn't the right tool for the job, and it likely never will be.

Investors have lost interest

UiPath is still growing revenue, albeit slowly, despite the threat from AI. The company is also profitable on a GAAP basis and generates impressive amounts of free cash flow. UiPath stock is down a whopping 87% from its all-time high, and it's tumbled nearly 60% since the start of 2024 as the AI boom picked up speed. Clearly, investors aren't all that interested as AI takes center stage.

This could be a mistake. While AI will likely play a role in the robotic process automation industry going forward, it probably won't remove the need for platforms like what UiPath offers. It would be great for businesses if reliably automating a task was as simple as writing a few sentences describing the task to an AI agent. That's not the reality, though.

While AI isn't the only reason UiPath stock has been pummeled -- a lofty valuation played a role as well -- the technology is clearly being viewed as a major threat by investors. If you think the potential of AI is overblown, UiPath could be a great way to profit if you are proved correct.