The giants of Silicon Valley are having a midlife crisis over AI

One minute you’re upending established industries as the young disrupter. The next, you’re staring into the abyss, eating glass—as Elon Musk likes to say—watching the disruption at your door.

Most, if not all, of the Magnificent Seven are in that position—weirdly trying at the same time to figure out the threat of artificial intelligence to their kingdoms.

That dynamic has been on display the past few weeks: Alphabet’s stock dropped more than 7% Wednesday after a senior Apple executive disclosed that Google search-traffic on its devices using Safari fell for the first time in 20 years. (Google later clarified it continues to see overall search growth, even from Apple devices.)

For his part, Apple Chief Executive Tim Cook is trying to buy time for his company, pushing investors during his latest earnings call to be patient with the iPhone maker’s delays around AI features.

Then there is Facebook co-founder Mark Zuckerberg’s attempt to paint a bright future for his ad-dollar juggernaut as something of an AI-buddy for the lonely.

Even Musk seems to be sweating things as he returns from his DOGE sojourn to Tesla, seeking to counter a slide in the electric carmaker’s stock price with promises of deploying driverless cars. “We’re not on edge of death—not even close," Musk told analysts recently.

His protests sounded like that “Monty Python and the Holy Grail" character about to be thrown on a pile of corpses: “I’m not dead! … I feel happy!"

To be fair, none of these giants are dead—yet. And they have lots of reasons to feel happy—they are wildly profitable pillars of corporate America and together represent around $7 trillion of market value.

Yet the crossroads they all stand at, collectively, and how they react, individually, look like ready-made case studies for a 21st century update of the classic business school book “The Innovator’s Dilemma."

Author Clayton Christensen tried to explain how new products or services displace existing players by creating new markets. It was a book that made the term “disruption" wildly popular in boardrooms—even if used in a way the late Christensen didn’t always intend.

The gist of his theory was that successful companies doing everything seemingly right can fail when smaller companies—not constrained by what has been—rise up, often with new technologies or processes. Think Netflix targeting through-the-mail subscribers versus Blockbuster’s in-store model.

Many turned to this book to explain the dot-com boom that helped usher in the current crop of Silicon Valley heroes. There are rough parallels today.

Just as the internet was a new technology that could do lots of things, AI holds many promises. But in these early innings, it isn’t clear how AI will be deployed—or by whom or when.

Pets.com, for example, wasn’t the winner many thought. That’s the rub. Even Christensen had a hard time predicting disrupters, like Apple’s iPhone.

When the gadget came out in 2007, the Harvard professor didn’t see it as a threat to phones. In fact, the device ushered in a new era of mobile computing and the App Economy.That app marketplace, however, might look a lot different if companies are reaching customers in different ways. AI agents, for example, could upend the App Store way of the world.

So far, Apple’s answer to AI has appeared to be heavy on the hype. “We just need more time to complete the work so they meet our high-quality bar," Cook told investors during Apple’s recent earnings call about the delay.

At least Google has an AI assistant, Gemini, though it’s unclear if that chatbot will be enough to save its real business—advertising, which accounted for most of its revenue last year. That’s a lot of ads sold off users clicking on links in a world where people increasingly ask a chatbot their questions, like: What is “The Innovator’s Dilemma" about?

Still, it might be surprising that no dominant platform seems to have a winning formula just yet.

That gives hope to the likes of Sarah Guo, a young venture capitalist in Silicon Valley. She is trying to make her mark by investing in the next hot AI startup that might dethrone the big dogs.

“There are many claims you can make strategically about why a company shouldn’t exist: because Microsoft should build it or Apple should build or Google should build it," she told me during the recent episode of the “Bold Names" podcast. But, often for these established companies, she said, it can be hard “being creative with a risky new product."

Just ask Google. The early days of Gemini were marred by apologies and promises to do better after its chat responses were seen as biased and—according to CEO Sundar Pichai—unacceptable. The rollout occurred amid concerns that startup OpenAI was ahead in the space, even though Google had been working on AI for a long while.

“No AI is perfect, especially at this emerging stage of the industry’s development, but we know the bar is high for us and we will keep at it for however long it takes," Pichai wrote at the time.

Sometimes big breakthrough innovations, which we want to call disruptive, in fact help sustain existing businesses.

Microsoft—with a market value that has again surpassed Apple—is looking pretty savvy having embraced AI for its workplace products. Nvidia, too, has been a big beneficiary of AI companies gobbling up its high-price chips needed for developing their models.

Yet the emergence of China’s DeepSeek and other new AI models that supposedly use far less pricey computing power raise new questions. It remains unclear where the value of the new technology will land.

It’s all such a dilemma. At least, nobody is dead—yet.

Write to Tim Higgins at tim.higgins@wsj.com