Tech CEOs Are Suffering from AI Psychosis, Says Box Founder Aaron Levie

Tech executives are suffering from a unique form of psychological disorder, one that makes them overly optimistic about the capabilities of artificial intelligence (AI). Box founder Aaron Levie has coined this phenomenon as "AI psychosis," and it's a condition that he believes is sweeping the tech industry.

CEOs are uniquely prone to AI psychosis because they’re sufficiently distant from the last mile of work that still has to happen to generate most value with AI.

Levie warns that CEOs are playing with AI without fully understanding its limitations. They develop prototypes, generate contracts, and then leap to assuming that AI can do the work. However, these executives aren't responsible for reviewing code, discovering bugs, or identifying calls to hallucinated libraries before software is deployed. They don't have to train AI models on a company's idiosyncratic contract terms or spend days combing through contracts to find sneaky terms.

• In other words, Levie's theory posits, CEOs don't really understand processes well enough to know what really can and can't be automated. But that lack of knowledge doesn't stop them from acting on their beliefs.

Levie is not an AI hater; he's actually a strong advocate for AI adoption. He believes that AI can revolutionize the way companies work and suggests that CEOs should use AI "a ton" to really see what it can and can't do. He advises them to come out the other side with an appreciation for both the upside and the real work.

But is this advice being heeded? In the first five months of 2026, the tech industry has had nearly as many layoffs as in all of 2025. Many companies have pointed to AI as a reason for cutting jobs, but some of these stories are surprising.

• Zeb Evans, the CEO of ClickUp, proudly declared on X that he had laid off almost a quarter of his employees after rolling out about 3,000 AI agents to do internal work.

Evans swore this wasn't done to reduce costs; instead, he wants a workforce composed of people who run AI agents and spend their days quickly reviewing the agents' work. He believes this will create a "100x org." However, the data on AI and productivity doesn't support such assumptions. By miles.

Research has shown that AI adoption improves productivity but creates a productivity paradox, in which perceived productivity gains are larger than measured productivity gains. AI agents just aren't doing human-quality work yet in many cases. They will need more time to outperform humans.

Are CEOs ready for that? If not, the most certain outcome of the ongoing CEO AI psychosis will simply be organizational chaos.

The Future of AI Adoption

The tech industry is at a crossroads, and the adoption of AI is a crucial factor in its future. Levie's warning is a timely reminder that CEOs need to understand AI's limitations and potential before adopting it. As the industry continues to evolve, it's essential to separate hype from reality and focus on practical applications of AI.

The Consequences of AI Psychosis

The consequences of AI psychosis are far-reaching and can have devastating effects on organizations. If CEOs continue to overestimate AI's capabilities, they will create unrealistic expectations and chaos in the industry. The result will be a bottleneck in executive work, as people who must authorize all the stuff everyone is producing struggle to keep up.

The Way Forward

So, what can CEOs do instead? Levie advises them to use AI "a ton" to really see what it can and can't do. He suggests that they come out the other side with an appreciation for both the upside and the real work. This approach will help CEOs make informed decisions about AI adoption and avoid the pitfalls of AI psychosis.

In conclusion, the tech industry is facing a unique challenge with AI psychosis. CEOs need to understand AI's limitations and potential before adopting it. By doing so, they can avoid the pitfalls of AI psychosis and create a more sustainable future for their organizations.