Logic tells us that companies that they lose money consistently should have a black future. What is happening in the world of AI is just the opposite, and right now ten startups in very red numbers They have achieved something unusual in one year: in one year they have grown by one trillion dollars in their joint valuation. It is something simply extraordinary… and disturbing.
The big three. OpenAI is of course the protagonist of this select group, and today it is estimated that its valuation amounts to half a billion dollars. Elon Musk’s company, xAI, is valued at 200 billion, while Anthropic is also close to that figure according to a Financial Times study.
In one year the valuation of these AI startups has skyrocketed. Source: Financial Times.
And his immediate followers. Databricks, which was founded in 2013, was quick to join that segment and now has an estimated valuation of $100 billion. Figure (robotics), SSI (Sutskever’s startup), Scale AI, Perplexity, Thinking Machine Lab (Mira Murati’s startup) or Cursor complete this group of new startups (almost all of them) and with skyrocketing valuations.
Investment fever. This growth in its valuation is due, of course, to the fact that all of these firms have raised multimillion-dollar investment rounds by firms that trust in a future full of AI. In fact, venture capital and investment companies in the US have injected 161 billion dollars throughout this year, and they have done so without being able to see even a hint that their bet is going to be a winner. All these AI companies They burn money like there’s no tomorrowand its profitability—and future—is an absolute unknown.
bubbles are good. “Of course there is an (AI) bubble.” The person who says it is Hermant Taneja, president of the venture capital firm General Catalyst. His firm has invested in Anthropic and Mistral, and has done so without batting an eye because according to him, “Bubbles are good. Bubbles align capital and talent into a new trend, which causes some carnage, but also creates new lasting businesses that change the world.”
Maybe it is, but only for a few.. Sam Altman, co-founder and CEO of OpenAI, also think there is a bubblebut it coincides with that positive vision because it is probably him who will benefit (if everything explodes). Robin Li, CEO of Baidu, already indicated a year ago that the bubble will end up bursting and that only 1% of companies will survive. Bezos adds to that perception: “this is the good type of industrial bubble that is totally contrary to financial bubbles. The banking bubble, the crisis of the banking system, that is simply bad, as happened in 2008. These bubbles are the ones that society must avoid.”
It happened with dotcoms. The analogy with the dotcom bubble It’s inevitable. At that time something similar happened with the inflated valuations of internet companies, and when the bubble burst only a few survived, but those that did managed to become the mistresses of the world.
ANDThis bubble is much bigger. At least, from the point of view of the figures invested. In the dotcom fever, venture capital companies invested 10.5 billion dollars, which if we adjust for inflation becomes about 20 billion dollars. In 2021, these same firms invested 135 billion in startups in the SaaS (Software as a Service) segment. This year, investment in AI companies will likely exceed $200 billion, according to PitchBook. One of the directors of these firms describes this with a strong word. “This is FOMO“.
And the valuations are skyrocketing. Startups that have $5 million in annual recurring revenue are seeking investment rounds that value them at $500 million. That they pursue those valuations that are 100 times their income makes ridiculous the excesses that already occurred in 2021, for example. Although venture capital firms know that they will lose money on most of their bets, they also hope that one or two that they get right will more than make up for that entire bet.
Not investing is losing forever. Mark Zuckerberg shares this vision of venture capital firms, and his company is making colossal investments to avoid missing out on AI. The founder and CEO of Meta recently explained that He doesn’t care about losing 200,000 million dollarsbecause it would be much worse to be left behind in this race. Marc Benioff, co-founder and CEO of Salesforce, agrees and believes that a trillion dollars of investment will end up wasted, but AI will end up producing 10 times that in value: “The only way we know to create great technology is to try as many things as possible, see which ones work, and then focus on the ones that succeed.”
Time will tell if they were right and if this bubble, as investors defend, is “a good one.”
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