VCs tighten filters on AI investments

ARTIFICIAL INTELLIGENCE (AI) STARTUPS may be the brightest stars in the venture capital universe these days, but the glow is beginning to blind some investors.

- S SHANTHI

Even as early-stage funds continue to pour record amounts into the sector, several venture capitalists (VCs) are quietly stepping back, wary of inflated valuations, weak monetisation plans, and untested business models.

"Many AI companies are putting forward high valuations, yet in several cases, their strategies for monetisation and long-term sustainability remain unclear," Milan Sharma, founder and managing director of 35North Ventures, told FE.

While he agreed that AI has the potential to redefine the future, he said survival will depend on fundamentals like strong technical talent, ethical governance, and a clear roadmap for scaling.

The caution stems from a growing sense of deja vu in global tech circles, with parallels being drawn to the dotcom bubble of the early 2000s.

Andrej Karpathy, a founding member of OpenAI, recently noted in a podcast that artificial general intelligence (AGI) remains at least a decade away, despite rapid progress in large language models.

HE WARNED THAT exaggerated claims about Al's capabilities could end up damaging the credibility of the field.

The numbers, however, tell a different story of exuberance.