AI is not in a bubble, says VC founder. Why he says it's different to the dotcom boom

As discussions swirl around the current state of the artificial intelligence market, opinions among investors vary widely. Recently, billionaire investor Ray Dalio indicated that his personal 'bubble indicator' is quite elevated, while Federal Reserve Chair Jerome Powell has characterized the AI expansion as distinct from the dotcom bubble of the late 1990s. Magnus Grimeland, the founder of the Singapore-based venture capital firm Antler, asserts that the market is not in a bubble. In a conversation on CNBC's 'Beyond the Valley' podcast, he outlined several key factors contributing to his perspective. Grimeland noted the unprecedented speed at which AI technology is being adopted in various sectors, contrasting it with past tech transformations, such as the transition from physical servers to cloud computing, which took about ten years. He emphasized that AI has become a priority for executives worldwide, regardless of their industry, from healthcare providers in India to Fortune 500 companies in the U.S. "There's a readiness to invest in utilizing this technology, and that shift has occurred almost instantaneously," Grimeland stated. The rapid adoption of AI, according to Grimeland, significantly diverges from the dotcom era when many unprofitable internet startups faced failure, leading to a near 80% decline in the Nasdaq index between March 2000 and October 2002. He pointed out that the growth driving today's AI sector is backed by tangible revenues. For instance, OpenAI, the organization responsible for ChatGPT, reported reaching $10 billion in annual recurring revenue as of June. This metric indicates the predicted earnings from customers over a year. Antler has invested in Lovable, a company that allows users to create applications and websites powered by AI. Lovable announced it achieved over $100 million in annual recurring revenue within just eight months of operation. Grimeland further highlighted the rapid consumer acceptance of AI technologies, pointing to a dramatic shift in online behavior over a short period. He illustrated his point by noting a significant reduction in his reliance on Google for searches, from 100% a year ago to approximately 20% now. The launch of OpenAI's ChatGPT Atlas browser for Mac OS earlier this month even resulted in a decline in stock prices for Google's parent company, Alphabet. While Grimeland acknowledged that a substantial amount of investment is flowing into AI companies at questionable valuations, he believes that such trends are typical at the onset of an investment cycle. He emphasized the immense potential within this industry, stating, "The opportunities in this space far exceed the current investments." When asked about the prospects for AI startups amid the dominance of large U.S. and Chinese corporations, Grimeland noted that these giants are facing unprecedented challenges. He cited the Chinese startup DeepSeek, which has developed AI models that rival those of OpenAI. Grimeland concluded by expressing confidence in the potential for smaller AI firms to rise to prominence, identifying characteristics that signal success, such as strong founding teams, increasing customer lifetime value, and decreasing costs of product delivery.