AI investment is booming. How much is hype?
CTV
In recent months, there has been feverish excitement surrounding the potential of 'generative' artificial intelligence to produce whopping returns for investors. But some in the industry are worried the funding frenzy is turning into a bubble.
French startup Mistral AI didn’t have a working product when it raised €105 million (US$118 million) in one of Europe’s largest-ever seed rounds last month. But Antoine Moyroud, a partner at Lightspeed Venture Partners, one of the biggest backers of the fledgling firm, wasn’t fazed.
“It may seem like a very big number,” he told CNN, but the company has big, global ambitions and needs a lot of expensive computing power to see that through, he said.
The blowout deal is just one example of the feverish excitement surrounding the potential of “generative” artificial intelligence — which can create original text, images and other content in response to prompts from users — to generate whopping returns for investors.
But some investors and people in the industry are worried the funding frenzy is turning into a bubble, with money thrown at companies that have neither earnings nor an innovative product nor the right expertise.
Emad Mostaque, founder and chief executive of Stability AI, a generative AI firm that also counts California-based Lightspeed among its funders, expects the current wave of investment in AI companies to create “the biggest bubble of all time.”
“I call it the ‘dot-ai’ bubble, and it hasn’t even started yet,” Mostaque said recently, referring to the “dot-com” bubble of the late 1990s, when speculative bets on nascent internet companies ultimately resulted in big losses for many investors.
The investment into Mistral AI is just one of many this year by venture capitalists jostling for a seat aboard the AI rocketship. In the first six months of 2023, they plowed $15.2 billion into generative AI companies globally, according to Pitchbook data.
