(Bloomberg) -- Late last year, Stability AI Ltd., a startup based in London, was at the center of the AI hype cycle thanks to the massive success of Stable Diffusion, an artificial intelligence model that enables users to create uncanny and sometimes startlingly realistic images based on prompts of just a few words.

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After raising more than $100 million, the company recruited a cadre of senior executives from larger technology firms as part of an ambitious plan to branch into new products and forge a viable business. Stability distinguished itself with its focus on open-source software, winning over experienced engineers and scientists from tech giants like Google, Amazon and Adobe, who saw making code public a better alternative to the closed AI models under development elsewhere. But with many other AI companies rushing their own models to market, Stability had to be fast.

Believing generative AI could be as consequential as the dawn of the internet, companies raced to develop this tech. During such periods of wild communal exuberance, Silicon Valley breeds not only successes but also CEO storytellers and hyperbolic claims. At first, Stability appeared to be on track to the top: The previously unknown company burst onto the startup scene in the fall as Stable Diffusion rapidly became one of the most popular image generators on the planet. In subsequent months, the company rolled out a slew of AI models and tools. Its leader, Chief Executive Officer Emad Mostaque, projected charisma and excitement.

“Look, we came out of nowhere, we did a few things, and I think we flipped the world of artificial intelligence,” Mostaque told a crowd at a splashy launch party in San Francisco in October, just after welcoming revelers with a giant projected image of himself astride a winged unicorn.