A ballooning artificial intelligence (AI) bubble could be a “healthy” sign for the market and shows investor optimism is roaring back, according to one of Britain’s most prolific entrepreneurs.
In an interview with City A.M., Lastminute.com and Firstminute Capital founder Brent Hoberman said the rapid surge in AI valuations shows investors are willing to punt on the market once again in the hope of landing on “one of those fabled 100x investments”.
“I think that often you do get these bubbles and you can actually say that bubbles are healthy,” Hoberman told City A.M.
“I would say that bubbles indicate an era of optimism from investors, when people are prepared to really look longer into the future.”
Generative AI funding rounds were among the few “hot deals” at the moment as VC investment remains subdued after a turbulent 12 months, Hoberman said.
Investors have reined in splashy bets in the past year after soaring inflation and rising interest rates rocked the market and turned off the taps of cheap cash.
The slowdown continued in the first quarter of this year, with a total of £2.9bn invested into UK firms in the opening three months of the year, the lowest amount of cash raised in the opening quarter of a year since 2020, according to data from big four firm KPMG.
Firstminute Capital was “definitely slower in terms of allocating capital” but was “still doing deals”, Hoberman said.
The uptick in private market AI deals follows a scramble from investors to back AI-related stocks on the public markets, which has pushed valuations to record highs over the past few weeks.
Nvidia, one of the world’s top producers of AI hardware and software, rocketed in value in the past week and briefly became the fifth firm to pass the $1 trillion valuation landmark.
However, the scramble from investors on both the public and private markets has triggered warnings from some analysts.
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