Cambrian Explosion

Around 540 million years ago, a great many new animal body plans appeared in the sea within a geologically short span of time. Researchers call this period of Earth’s history the Cambrian; the event itself is called the Cambrian Explosion. Before it, there were almost only simple organisms; afterward, there were eyes, shells, legs, and predators. In business and technology, this image is used as a comparison. What is meant then is a phase in which a new base technology suddenly gives rise to hundreds of different applications. Anyone reading the term in an article about artificial intelligence almost always means this figurative sense.

Why investors reach for this image from Earth’s history

The image conveys something about speed and diversity at the same time. It doesn’t just describe that a lot of money is flowing into a sector. It asserts that a great many fundamentally different forms are being tried out simultaneously. That is precisely the crucial piece of information for investors.

Because during such a phase, it’s unclear which form will prevail. In Earth’s history, most of the Cambrian body plans went extinct again. Only a few lineages led to today’s animal groups. Translated: the majority of new companies will disappear. Anyone investing early therefore spreads their money across many candidates.

The comparison also carries a warning. Explosions are brief. After the phase of diversity, a period of selection typically follows, in which a few large providers come to dominate. So anyone using the term is indirectly predicting that the current state of confusion will not last.

What actually triggers such a phase of diversity

In biology, several triggers are discussed. Oxygen levels in the ocean likely rose, and at the same time new possibilities emerged with eyes and jaws. When conditions change, many niches open up at once. Each niche rewards a different body plan.

In technology, it plays out similarly, just faster. A new building block becomes available and cheap, and suddenly it’s possible to build things that were previously impossible. In the current AI wave, this building block was the ability of language models to generate usable text and code. On top of that, companies began renting out these models via an interface. An interface is a technical access point through which an outside program can use the models without owning them.

This dramatically lowered the barrier to entry. Training your own large model costs hundreds of millions. Building a product that uses a rented model costs a few months of work. That is precisely why thousands of new applications emerged within two years instead of just a handful.

The term in analyst reports and company presentations

The term appears most often in market analyses and at investor conferences. Chip manufacturers and venture capitalists like to use it because it signals growth and a new dawn. It also turns up in reports on robotics development, when many designs are being tested in parallel. In academic articles on biology, however, it still refers to the actual event 540 million years ago.

A common mistake is to equate the term with a “bubble.” Both terms describe excess, but different aspects of it. A bubble refers to prices that are too high and will eventually collapse. The Cambrian Explosion refers to the number of variants. There can be a phase of diversity without a price bubble, and vice versa.

The term is useful mainly as an aid to framing. If you read that an industry is experiencing its Cambrian Explosion, expect a confusing abundance of offerings. But also expect that most of them will no longer exist within a few years. Anyone reading the term critically should always ask: which form will survive, and why that one in particular?