AI companies will get a reality check that slashes their valuations and curbs their spending, Bill Gurley says.
“One day we’re going to have an AI reset, because waves create bubbles, because interlopers come in,” the legendary venture capitalist said during a Monday interview on CNBC.
However, Gurley said the sell-off will allow bargain hunters to snag a deal. He said investors should emulate Warren Buffett by determining at what price they would buy software-as-a-service (SaaS) stocks, and “start gobbling them up” when they fall to those levels.
“You shouldn’t be out on Twitter saying they’re mispriced,” he said. “You should be figuring out how you back up the truck.”
Gurley — a general partner at Benchmark and early backer of Uber, OpenTable, and Zillow — said that bubbles form when people see early investors getting rich quickly and rush to buy in.
He sounded the alarm on the tens of billions in funding being raised by AI startups such as OpenAI and Anthropic, and the hundreds of billions being spent on building data centers by the Magnificent Seven.
“One day, I just think we trip and run out of money on those things,” Gurley said. “I do think that moment stands in front of us.”
He said private AI companies look enormously risky given how quickly they’re burning through vast amounts of cash, and added that runaway expenses often mean a business isn’t focused.
“I just think it’s harder to land the plane,” he said, underscoring how difficult it will be for 30 or 40 AI startups that are losing billions of dollars each year to all become profitable.
Several other high-profile investors have warned that the AI boom is unsustainable even if the underlying technology is transformative. Michael Burry of “The Big Short” fame has warned of dangerous levels of overinvestment, while GMO’s Jeremy Grantham has underlined that bubbles often form and then pop at the start of tech revolutions.
Gurley recently published a book titled “Runnin’ Down a Dream: How to Thrive in a Career You Actually Love.” One of his core messages is that people who aren’t passionate about their work are most at risk of falling behind their peers and losing their jobs to AI.
He recently said that someone who cares about what they do will naturally learn and improve over time — and they can accelerate their progress by harnessing AI as it’s “jet fuel” for gaining knowledge and skills.
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