Artificial intelligence will undoubtedly change a lot about our world in the long term. But right now we may be living in an AI bubble.
Those seeking evidence of this might point to the news that Cognition Labs is seeking a $2 billion valuation reported until Wall Street Journal on Saturday.
Cognition Labs was founded in November and makes Devin describes as the “first fully autonomous AI software developer.” No real revenue was generated. It started Devin this month.
Earlier this year, the startup raised $21 million in a deal worth $350 million. It subsequently rejected offers worth $1 billion. Well, according to the diaryThe company is currently negotiating with investors on a deal that would be worth up to $2 billion.
That’s an amazing number for a new company. But in today’s AI space, none of this is so shocking. Perplexity, a challenging AI search startup Google, secured financing a few weeks ago it was valued at $1 billion, up from $520 million a few months earlier Amazon Founder Jeff Bezos among the supporters. Mistral, a French AI startup founded just over a year ago, has achieved success Valuation of $2 billion In December.
“Every bubble has a compelling narrative”
Each of these startups could certainly justify their high valuations. But as more and more AI companies raise improbably large sums of money from investors who diversify their stakes, the feeling of a bubble is increasing among some observers.
Albert Edwards, chief global strategist at Société Générale, is among the skeptics.
“Every bubble has a compelling narrative,” he said wrote in a note this week. “The current narrative focuses on expectations of an AI-driven rise in corporate earnings to fully justify current stratospheric valuations. Those of us who lived through the late 1990s [tech] Bubble has heard it all before and rolls his eyes skyward.”
As for Devin, “Many companies are working on a variation of this idea,” noted venture capitalist David Sacks in a recent report Consequence of All-In Podcast. While he likes the company’s “agent-first approach” to generating new software projects, “I think it gets a lot harder and harder when you’re working with existing code bases,” a challenge that other AI startups are also taking on.
One advantage of Devin, he added, is that it will “demonstrate really well.”
Of course, it remains to be seen whether cool demos that excite investors today can also be translated into thriving companies in the future. Either way, today’s stunning valuations for untested startups will likely be remembered.