To many investors, valuations in AI land are bonkers—yet others justify them. This isn’t your usual bubble mania. Most valuations are bonkers, yet some valuations, even some apparently high valuations are not bonkers.
The lower valuations will not be the ones that will be good investments! My message: don’t indiscriminately pay up, but extremely selectively do pay up as huge outliers will more than pay for the losses in the AI field!
Why did this “bonkers environment” happen? Too many people missed out the early years of AI focusing instead on other areas like crypto and its 2020-22 craze. And now every investment firm must have an AI “play” in every category, be it foundation models, applications, robotics, agents, ERP … and every limited partner wants to deploy money into AI and hence fundraising for venture funds is easier. Large amounts of money flowing in increases valuations. Increased valuations and resultant funny money returns attract more money from all manner of people, informed on AI or not, who don’t want to miss out, increasing valuations further. Press hype around AI reinforces the cycle, till such time the “bubble” stories start...
Full op-ed available in The Information.