French startup Mistral AI didn’t have a working product when it raised €105 million in one of Europe’s largest-ever seed rounds last month. But Antoine Moyroud, a partner at Lightspeed Venture Partners, one of the biggest backers of the fledgling firm, wasn’t fazed.
Emad Mostaque, founder and chief executive of Stability AI, a generative AI firm that also counts California-based Lightspeed among its funders, expects the current wave of investment in AI companies to create “the biggest bubble of all time.” “We’ve [seen] some people that haven’t necessarily spent a lot of time in the industry and are adding — if you could say so — a bit of generative AI sparkle” to their pitches, Moyroud said, noting that it takes time to tease out the “substance” behind some founders’ claims.He doesn’t include Mistral AI in that group.
But Nvidia’s stock has also traded on a price-to-earnings ratio — a measure of whether a share is over- or undervalued — of 237 over the past 12 months. The higher the ratio, the more likely a stock is overvalued. For comparison, companies on the S&P 500 have traded on an average ratio of 24 over the same period.
Mike Reynolds, vice-president of investment strategy at Glenmede, a U.S. wealth management firm, said the current excitement is “reminiscent of the [90s] tech bubble when a lot of… companies weren’t turning earnings yet, but people were getting so upbeat on their prospects that they were willing to bid [their stock price] ever higher.”PICKING A WINNER