New research by the Financial Times shows that ten unprofitable AI start-ups have gained nearly $1 trillion in value over the past year. This sharp rise has raised concern that private investors may be fueling a new bubble that could spill into public markets. Major players such as OpenAI (PC:OPAIQ), Anthropic (PC:ANTPQ), and Elon Musk’s xAI (PC:XAIIQ) have each seen their valuations multiply. Meanwhile, smaller companies including Perplexity, Anysphere, Scale AI, Safe Superintelligence, Thinking Machines Lab, Figure AI, and Databricks have also posted rapid gains.
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Growing Capital and Rising Valuations
U.S. venture capital firms have spent about $161 billion on AI this year. That is roughly two-thirds of all their investments. By the end of the year, total spending could pass $200 billion, making it the largest single wave of tech investment since the dot-com era. For comparison, venture firms spent about $20 billion on internet companies in 2000, when adjusted for inflation.
Nevertheless, many investors see AI as a once-in-a-generation opportunity. Hemant Taneja, head of General Catalyst, said that bubbles help new ideas grow by aligning money and talent. Marc Benioff, chief executive of Salesforce (CRM), agreed that some losses are likely but said AI could still create $10 trillion in new value.
However, not everyone shares the same level of confidence. Some investors warn that early-stage AI companies are asking for valuations that are far above their earnings. A start-up with $5 million in annual recurring revenue is now seeking a $500 million valuation. That equals about one hundred times revenue, which is higher than even the peak of 2021’s software boom.
Market Connection and Investor Risk
This surge in private values is now shaping the stock market. Public companies such as Nvidia (NVDA), Advanced Micro Devices (AMD), Broadcom (AVGO), and Oracle (ORCL) have gained hundreds of billions in market value after striking AI supply deals. Their success depends on continued demand for computing power from groups such as OpenAI. Yet if the start-ups slow their spending or struggle to raise more capital, those gains could fade.
OpenAI now brings in about $13 billion in annualized revenue, three years after releasing ChatGPT. The growth rate is fast, but the company still spends heavily on model training and infrastructure. Its main rivals, including Meta (META), Alphabet (GOOGL)(GOOG), and Anthropic, are also investing large sums in data centers and research. Because of these costs, profitability may still be years away.
Despite these risks, the Street remains optimistic. Many believe that even if most AI bets fail, the winners could reshape entire industries. Venture firms often expect one or two major successes to offset many smaller losses. As one analyst put it, if artificial general intelligence (AGI) ever arrives, the spending will have been worth it.
In the meantime, the strong link between private funding and public market sentiment is clear. Chipmakers and cloud suppliers continue to benefit from AI demand, while investors weigh whether valuations can keep rising without clear profit paths. For now, the AI boom is still driving both excitement and caution across markets.
By using TipRanks’ Comparison Tool, we’ve compared notable AI firms alongside the tickers appearing in the piece. This is an excellent way for investors to gain a comprehensive look at each stock and the industry as a whole.
