Investing in AI: The view from one big investor

WALL STREET JOURNAL

AI companies are growing almost five times faster than the software companies that came before them, which is good and bad. It’s good because it demonstrates the market pull. You can really understand the customer value that’s being provided. But things like differentiation and moats [that is, whether a company has a durable, competitive advantage] are a lot more challenging to assess.

Some of these AI companies are smaller than we’ve ever seen because it’s easier than ever to build a company, and you can do a lot more with fewer resources. So in some places, we’re seeing this massive growth, really profitable business models, smaller teams. In other cases, we’re seeing business models that I would call still emerging.

Many of the most successful AI companies that we’re looking at this year, if you would have looked at them 12 months ago, had negative gross margins. They were burning significant amounts of capital. The investment landscape today requires an ability to underwrite that. You need a strong stomach.

Read more | WALL STREET JOURNAL

---