Veteran venture capitalist Jay Hogue believes AI investment hype has gone too far.
The TCV co-founder criticized what VCS considers as a blind rush to AI.
“Following the momentum of chasing or feeling the momentum of money,” he said in an episode of the “Invest like the Best” podcast released Tuesday.
“We're at risk of humiliation, like a 7-year-old probably plays football. The ball goes over there and everyone goes there,” Hogue said.
Hoag said the hyperfocus on AI as a service and software diverts attention and capital from other viable sectors, particularly the consumer internet.
The AI is “super shiny” and “very interesting,” he said. “I struggle just to believe there is no new consumer internet business that has been established and built over the next 10 or 20 years,” he added.
“I hope that AI enthusiasm isn't distracting everyone.”
Hoag has spent over 40 years investing in technology. He co-founded TCV in 1995 and chaired its investment committee. The company supports Silicon Valley's biggest wins, including Netflix, Expedia, Peloton, Spotify and Zillow.
Hoag also expressed concern about the “huge” totals poured into startups during the 2020-2021 tech boom.
“I'm a bit worried that some of the capitals (this is a huge sum of money) from 2020 to 2021 are generally broken capitals,” he said. “I wish we had a little more humility in our business.”
Hoag did not respond to requests for comment from Business Insider.
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AI hype train
In the first quarter, more than half of VCS' investment was sent to AI and machine learning startups on a per-pitchbook basis. Last year, global investment in the sector totaled $131.5 billion, up more than 50% from 2023, Pitchbook data shows.
Hoag isn't the only investor ringing the alarm bell. MIT economist Daron Acemoglu told Bloomberg in an interview last year that the hype surrounding AI might not meet that lofty expectations.
“A lot of money will be wasted,” Acemoglu said.
Veteran VC Vinod Khosla said in 2023 that most startups are overvalued and that most investments in AI “lose money.”
