Venture capital is pouring into artificial intelligence, but global investors warn early-stage valuations are looking dangerously frothy.
Artificial intelligence startups are raising record sums in 2025, but some of the world’s biggest investors are flashing warning signs. At the Milken Institute Asia Summit in Singapore, GIC’s Chief Investment Officer Bryan Yeo said the market is showing clear signs of hype.
“Any company with an AI label will be valued right up there at huge multiples of whatever the small revenue is,” Yeo cautioned, adding that early-stage valuations in particular look unsustainable.
Record Funding, Record Risks
According to PitchBook, AI startups raised $73.1 billion globally in Q1 2025, accounting for nearly 58% of all venture capital activity. OpenAI alone brought in $40 billion earlier this year, while rivals Anthropic and Musk’s xAI secured multi-billion-dollar rounds.
But investors like TPG President Todd Sisitsky warned that “FOMO is dangerous.” Some firms are generating revenue at breakneck speed, but others are commanding eye-watering valuations of $400 million to $1.2 billion per employee—a level he called “breathtaking.”
AI Hype Meets Macro Uncertainty
The AI boom coincides with a broader tech-driven stock market rally, fueled by chipmakers like Nvidia, AMD, Samsung, and SK Hynix. These names have surged as investors bet on the infrastructure required to power projects like OpenAI’s Stargate initiative.
Yet the optimism sits alongside serious macro headwinds. The US government shutdown has delayed key data releases such as September’s jobs report, leaving the Federal Reserve flying blind ahead of its October meeting. Hiring plans are at their weakest since 2009, and planned job cuts are on pace to surpass 1 million this year.
Treasury Secretary Scott Bessent has warned the shutdown could carve $7–15 billion off GDP per week, while President Trump has openly threatened federal layoffs. For investors, the lack of reliable data makes Fed policy harder to predict, adding volatility to markets already stretched by AI-driven exuberance.
Safe Havens Gain Traction
As investors pile into AI, gold has quietly been the year’s star performer. Spot gold is up more than 45% in 2025, hovering near $3,860 per ounce, with gold equities soaring 135%. Central bank demand, a weaker dollar, and expectations of more Fed rate cuts have made bullion the go-to hedge against both political dysfunction and frothy valuations.
The AI boom is undeniable, but so are the risks. Record funding and lofty valuations may keep powering tech higher in the short run, but history suggests bubbles eventually correct. With the Fed facing data blind spots and safe-haven assets surging, investors must weigh whether today’s AI frenzy represents sustainable growth—or just another case of markets running ahead of reality.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
Related:
OpenAI Surges to $500 Billion Valuation, Overtakes Musk’s SpaceX
Trump’s $100,000 H-1B Visa Fee: What It Means for Tech, Talent, and Markets
Fed Divide Widens as Policymakers Clash Over Pace of Rate Cut
