The argument for current LLM AIs leading to AGI has always been that they would spontaneously develop independent reasoning, through an unknown emergent property that would appear as they scale. It hasn't happened, and there's no sign that it will.
That's a dilemma for the big AI companies. They are burning through billions of dollars every month, and will need further hundreds of billions to scale further - but for what in return?
Current LLMs can still do a lot. They've provided Level 4 self-driving, and seem to be leading to general-purpose robots capable of much useful work. But the headwinds look ominous for the global economy, - tit-for-tat protectionist trade wars, inflation, and a global oil shock due to war with Iran all loom on the horizon for 2025.
If current AI players are about to get wrecked, I doubt it's the end for AI development. Perhaps it will switch to the areas that can actually make money - like Level 4 vehicles and robotics.
I don't know of anyone seriously making the argument that LLMs would spontaneously develop independent reasoning. There's a huge amount of working currently being put into making them develop independent reasoning. Agentic workflows, chain of thought built into training data, that sort of thing. That's what those further investments you mention are involved in accomplishing.
That's not a "bubble bursting", that's just ordinary churn. Companies come and go all the time, especially in cutting-edge fields like AI.