The Spike In AI Startup Funding Triggers Investment Bubble Concerns

Bryan Yeo, Chief Investment Officer of the Group, together with investors from Saudi Arabia (photo: x@TheBgiGroup)

JAKARTA - Artificial intelligence (AI) startups are withdrawing investment records from venture capital around the world. However, a number of major world investors have begun to warn that the early-stage company valuation now appears too high and has the potential to cause investment bubbles.

"A little bit more, there's a kind of hype bubble going on in the early-stage venture capital room," said Bryan Yeo, Group's Chief Investment Officer at GIC, Singapore's state wealth fund, in a panel discussion at the Milken Institute Asia Summit 2025 in Singapore, Friday 3 October.

Yeo assessed that many startup companies that attach a AI' label are directly valued with multiple valuations compared to their actual income. Every startup that uses an AI label will be directly assessed with a large multiple of their small income. It may be fair to some companies, but it may not be for others either," he said.

According to PitchBook data, in the first quarter of 2025, AI startups managed to raise US$73.1 billion globally equivalent to 57.9% of total venture capital funding worldwide. This surge was largely triggered by large funding rounds such as US$40 billion in fundraising by OpenAI, prompting investors' chases not to miss the AI trend.

But Yeo warned that the market might put too high expectations on current AI technology capabilities. "Market expectations can go far beyond what this technology can actually convey," he said. We're seeing a huge explosion of capital expenditure investment (capex) for AI today, and that's covering some potential weaknesses that may be happening in the global economy."

A similar view was expressed by Todd Sisitsky, President of alternative asset manager TPG Inc., who called the phenomenon of fear of missing out (FOMO) among investors dangerous.

A fear of being left behind can make investors make irrational decisions," said Sisitsky. Even so, he added that there are still differences of opinion among investors about whether the AI sector has really formed a bubble or not.

Sisitsky gave an example, there is an AI company that managed to reap revenue of up to 100 million US dollars in just a matter of months, but there is also an early-stage company that received a fantastic valuation of between 400 million US dollars and 1.2 billion US dollars per employee. "That figure is really extraordinary," he said.

Observers think that this trend shows an extraordinary passion for AI, but also implies the risk of an overvaluation that has occurred in previous tech bubbles. Investors are now faced with a dilemma between following market euphoria or maintaining investment discipline amid the global AI boom.