Concerns about an “AI bubble” are gradually emerging in the market, but the fervor for investment in the revived U.S. venture capital market continues, with quarterly investment volumes expected to reach their highest in three years. However, it appears that most of the investment funds are concentrated on a select few established companies in the market.
According to a report by the Financial Times (FT) on the 10th (local time), citing data from market research firm PitchBook, venture capital investments in startups in the first quarter of this year exceeded $30 billion. Additionally, with ongoing fundraising activities by companies such as OpenAI, AI research firm Safe Superintelligence, and defense technology startup Anduril, another $50 billion is expected to be invested soon.
In the fourth quarter of last year, U.S. venture capital firms invested about $80 billion, recovering from a two-year slump, and this momentum is likely to surpass the previous quarter. Venture capital investment peaked at $358 billion in 2021 but showed signs of stagnation thereafter due to the perception that the valuations of investment companies were unrealistic.
Hemant Taneja, CEO of General Catalyst, a major venture capital firm in Silicon Valley, said, “AI is a transformative force that makes startups better companies,” and added, “We consider whether ‘investment companies can grow tenfold more rationally,’ and the answer was ‘yes.’ Therefore, it is considered a rational investment.”
However, this venture investment is concentrated on a few companies. Kyle Stanford, a research director at PitchBook, noted that “in the fourth quarter of last year, investments in six companies, including OpenAI, xAI, and Databricks, accounted for 40% of the total investment,” indicating that a few elite companies are leading the venture capital investments. The name “venture capital” implies investing in unproven companies with potential growth, yet funds are being funneled only into verified companies, indicating that the AI bubble theory is even affecting the venture investing industry.
There are also numerous instances of repeated investments in the same companies. OpenAI is in discussions with SoftBank to raise $40 billion with a company valuation of $260 billion. If successful, this will surpass the $10 billion fundraising scale by Databricks at the end of last year, marking the largest in history. Anduril, which secured funding last summer, is in talks to raise at least $2 billion, with its company valuation now recognized as over $30 billion, more than double at that time.
CEO Taneja added, “Finding companies that can make money with AI is very difficult, so venture capital investments are focused on industry leader companies with a customer base and a large market.”