Artificial intelligence (AI) has gone beyond being an information mediator and has become an ontological force that creates and sustains digital realities. This paper proposes the Age of Chimera, as a conceptual framework to analyze the epistemic dominance of AI, where algorithmic power has taken over from institutional power in the production of knowledge. Drawing on postmodern philosophy, AI ethics, and media studies, this paper discusses how AI-driven ecosystems sustain ideological silos, modify people’s perceptions, and determine their beliefs. In contrast to previous research on algorithmic bias, this paper claims that AI operates as an autonomous ideological system that updates and propagates itself through engagement-driven mechanisms. Using a theoretical integration, the study builds on Baudrillard’s hyperreality, Castoriadis’ social imaginaries and Bourdieu’s symbolic capital to reveal how AI-generated knowledge loops subvert conventional epistemological structures. Although algorithmic systems can pose threats in the form of information asymmetry, epistemic fragmentation, and ideological hegemony, they also provide an opportunity for decentralized governance and democratized knowledge production. The paper ends with a proposal of counter-algorithms, AI literacy education, and the necessity of the transparent governance of AI as vital measures. Thus, the paper presents the Age of Chimera not as a technological tool but as a structural condition, offering a theoretical foundation for rethinking AI’s role in contemporary digital epistemologies.