examines the paradox of unprecedented investment in the artificial intelligence sector coexisting with an accelerating rate of startup failures. It identifies a failure rate exceeding 90% for AI startups, significantly higher than the broader tech industry. The analysis categorizes these failures into distinct modalities: Market Failure (lack of product-market fit), Product Failure (technology underdelivers or is unreliable), Execution Failure (poor management or fraud, often exacerbated by excessive funding), Financial Failure (running out of capital, usually a symptom of deeper issues), and Competitive Failure (core technology rendered obsolete by larger foundational models, termed the "Foundational Model Guillotine"). The report offers strategic recommendations for founders to build defensible moats beyond mere algorithms, embrace capital efficiency, and solve urgent customer problems, while advising investors to scrutinize for AI-washing and assess competitive risks.