Hollywood’s AI Breaking Point May Be Nearing

AMC Theatres’ about-face on screening an AI-created animated short that had won a film festival award was one more eye-opener in a new year filled with them. The chain had been scheduled to run the short film Thanksgiving Day as part of its preshow ad bloc, the startup outfit Frame Forward AI Animated Film Fest says. But execs at AMC claimed they hadn’t been consulted by the firm that does the bookings, and now that they knew, they were shutting it down.

AI is hardly a huge bogeyman to theater owners; in fact, the coming glut could even help them. But the Adam Aron-led company grasped a fundamental truth of doing business in Hollywood, circa 2026: Wade into AI waters at your peril.

The number of AI studios blanketing Hollywood, along with the VC dollars to power them, is increasing at an astonishing rate. Hollywood-focused video-generation platform Runway AI revealed a new cash raise of $315 million; Saudi Arabia led a $900 million funding round for Amit Jain’s startup Luma; all-purpose AI giant Anthropic raised $30 billion. And the battle to release new models is ratcheting up the way the U.S. and Soviet Union once piled on new nuclear weapons.

Google, Runway and former TikTok majority owner ByteDance have all released new models in 2026, seeking to jump-start a market of creators using AI tools to vomit massive amounts of entertainment over the more limited, painstaking work of traditional shoots and studios.

But Big Tech’s push to make retch happen may not be as simple as just dumping money on the sector. All of the tech and dollar energy for AI video is emerging as many of the pros responsible for the content landscape — from writers to directors to traditional ad execs — express concern about the jobs and creativity lost, providing a key impediment to the transformation.

The push is happening even as AI’s biggest customer base expresses deep skepticism about what the movement is trying to ignite. A post-Super Bowl survey of 500 Gen Z and Gen Alpha consumers by youth-focused data firm Cafeteria found that “AI missed big time,” according to the company, as a slew of respondents reacted negatively to ads with AI messaging relative to more traditional products and non-slop content. “Any of the ai ads, like Meta and ChatGPT. I don’t like what they were promoting,” a 19-year-old from Orlando said.” “All the ai ads omg,” said a 17-year-old from Mount Airy, Maryland.

“Gen Z/Alpha expressed strong negative feelings toward AI and AI-created ads,” the research firm concluded.

Neutralizing that skepticism will be key for AI companies. Right now, the main audience for these moves seems to be Wall Street, as the so-called AI boom that has powered the economy and the stock market shows no sign of slowing down. But whether end users — the group said boom assumes and ultimately depends on — will embrace the fruits of the AI age has yet to be demonstrated. And whether that misalignment can be addressed remains the central narrative of Hollywood in 2026.

A big flash point came with the release of Seedance 2.0, a video tool that leveled up what Sora 2.0 had done, as a Brad Pitt-Tom Cruise fight over a fictional Jeffrey Epstein plot spread faster around the social web than an Epstein island conspiracy theory. The model’s parent agreed to put up some guardrails after getting threatened by everyone from SAG-AFTRA to Netflix.

“Seedance acts as a high-speed piracy engine … [and] Netflix will not stand by and watch ByteDance treat our valued IP as free, public domain clip art,” its lawyers wrote to ByteDance executives. The Motion Picture Association, which reps all the major studios, followed with a cease-and-desist letter calling infringement “a feature, not a bug” of the product and major talent agency CAA said Seadance has a “brazen disregard for creators’ rights.”

But the feeling abides that something has fundamentally changed. Around town, writers and directors went about their work with a kind of grim acceptance, like a farmer shuffling to his plow even as the tornado clouds above grow darker.

“I’m shook,” wrote Deadpool screenwriter Rhett Reese in a viral X post. And even though writers — whose currency is the very non-AI realm of imagination and humor — may be in a comparatively good position relative to set designers and other physical production professionals, the mood remained bleak just the same. 

All of this is happening as the biggest Hollywood AI deal to date — a Disney+/OpenAI partnership that will encourage an inundation of the platform with user-generated Sora 2.0 content — hovers above.

As the battle heats up, politicians have stepped in. Democratic senator and emerging anti-AI force Bernie Sanders just came to California to meet with tech executives and Silicon Valley Rep. Ro Khanna, telling reporters shortly before the trip that he hoped these AI moguls can address his fears.

“We would be very, very mistaken not to have deep concerns about the transformative impact these technologies are going to have and the understanding that we are in no way prepared to deal with them,” Sanders noted. He said he planned to communicate this to executives. 

Sanders said he recently met with AI godfather turned alarm-raiser Geoffrey Hinton, who has argued that a new kind of work- and humanity-threatening intelligence was rising quicker than he can handle it, and it helped shape Sanders’ thinking.

Industry grassroots activity has continued apace. After helping launch the industry-wide Creators Coalition on AI to deal with the risks, Everything Everywhere All at Once director Daniel Kwan has continued to beat the drum, telling the audience at a Sundance panel, “There’s this feeling that this tech is inevitable.” It isn’t, he said. “Filmmakers, you are experts. You’re experts in storytelling,” and “we cannot allow the tech industry to set the terms for our industry.”

Meanwhile, another creative with a history of pushing back, 2023 strikes guild adviser Justine Bateman, was planning her own offensive. The founder of Credo23, a seal-of-approval for creative work signifying a lack of AI use, is about to debut her second “No AI” film festival in Hollywood in March and has recruited a who’s who of major names to attend and speak, including 2025 Oscar juggernaut Sean Baker as well as Gus Van Sant and Matthew Weiner.

Bateman says that she takes heart not just in the pushback from Hollywood but the audience via surveys like the Super Bowl one. “If Generative AI is being incorporated into entertainment, and the people who are supposed to view it don’t want it, then who is really your customer?” she asks.

She remains vexed that the biggest Hollywood companies like Disney are making deals with AI firms that have trained their models on unauthorized data.

“It’s like, ‘Hey, you’re stealing from us, so I’m going to invest in your burglary enterprise so you’ll stop stealing,’ ” she says. “It’s such an odd thing to do.” Given how pitched Hollywood’s AI wars are getting, odd may be the least of it.

This story appeared in the Feb. 23 issue of The Hollywood Reporter magazine. Click here to subscribe.