Demis Hassabis has a blunt message for some in the AI startup world. “Some of this looks unsustainable.”
In today's AI funding frenzy, a “bubble” is likely forming, especially among early-stage startups raising money at huge valuations, DeepMind's co-founder and CEO said on Tuesday's episode of “Google DeepMind: The Podcast.”
He said some startups have raised “tens of billions of dollars in valuations right after they started,” even though they “basically haven't even started operating yet.”
“It will be interesting to see how that becomes sustainable. My guess is that it probably won't, at least in general,” he added.
Hassabis drew a distinction between these big seed rounds and big tech companies pouring billions into AI infrastructure. He said there is “a lot of real business” to support Big Tech's valuation.
AI is “overvalued in the short term,” he added, but “remains undervalued in the medium to long term.”
Hassabis said “overcorrection” is imminent when it comes to big technology changes like AI, especially when it quickly moves from skepticism to obsession.
“When we started DeepMind, no one believed in it,” he said. “Ten, 15 years later, it's now apparently the only thing people talk about in the business world.”
These kinds of swings often push valuations up too much and too quickly. “It's almost an overreaction to an underreaction,” he says.
Hassabis also said he is not worried about whether AI is in a bubble and is focused on his work. Google DeepMind builds AI models that power Google's products, including Gemini, and leads the company's cutting-edge AI research.
Super high ratings for AI startups
Hassabis' comments come as valuations for AI startups continue to soar.
Business Insider reported last week that young founders, some of whom are fresh out of school, are raising millions of dollars for AI startups. Many people have dropped out to ride the AI wave, and they are attracting top-notch investors and talent.
A Stanford University dropout raised $64 million for an AI math startup earlier this year. Axiom Math founder Carina Hon has hired top AI talent from Meta and Google Brain.
The 16 young founders Business Insider spoke to this year have secured more than $100 million in funding.
But not everyone buys the hype. Howard Marks, co-founder of Oaktree Capital Management, said on last week's episode of the podcast “We Study Billionaires” that investors are flocking to AI startups with little track record.
“Do you want to start a brand new entrepreneurial startup that has no revenue or profit right now, but could potentially be a moonshot if it does well?'' the billionaire asked.
“Or do you want to invest in great technology companies that are already out there and making a lot of money, where AI is incremental but not life-changing? That's a choice.”
