Eye On AI: The Never-Ending AI Valuation Escalation Part II

This column is a look back at the week that was in AI. Read the previous one here.

It was just four months ago we examined right in this very column the exorbitant valuation jumps many (all?) AI startups had been enjoying in the then-recent months.

Well, February showed that type of craziness can happen in just one short month.

The year is still young, but AI valuations are already reaching astonishing heights. SoftBank‘s planned $40 billion investment into OpenAI would come at a nearly $300 billion valuation, almost double its valuation from October.

The creator of ChatGPT isn’t the only one experiencing such a valuation surge.

Perhaps the most eye-catching one was the raise first reported last week and just closed days ago — Anthropic’s fresh $3.5 billion funding round led by Lightspeed Venture Partners that valued it at $61.5 billion.

Anthropic’s new valuation will be more than triple what it was just a year ago, when it was valued at $18.5 billion. The round also will value Anthropic at more than Elon Musk’s xAI — which was valued at $50 million in November after its $6 billion Series C (which Lightspeed also participated in) — so how how long do any of us believe it’ll take xAI to raise at a larger valuation?

That’s not all. Just a week before that, Together AI, which makes a cloud platform for developers to build on open and custom artificial intelligence models, raised a $305 million funding round led by General Catalyst and Saudi Arabia’s Prosperity7 Ventures at a $3.3 billion valuation.

The new valuation is a more than 160% jump from the $1.25 billion Together AI was valued at after Salesforce Ventures 1 led a $106 million round for the Menlo Park, California-based startup just last March.

Wait, there’s more

Earlier in February, San Francisco-based artificial intelligence legal tech startup Harvey raised a $300 million round led by Sequoia Capital that values the startup at $3 billion, per a report. It was just last July when Harvey raised a $100 million Series C led by GV with participation from the likes of OpenAI, Kleiner Perkins and Sequoia Capital at a $1.5 billion valuation.

So, in about 200 days the startup really doubled its valuation by $1.5 billion? As for the investors, Sequoia has really seen enough in the last five months to put in even more money, but for half the stake it would have received just five months ago?

However, perhaps nothing really comes close to AI research lab Safe Superintelligence being in talks to raise another $1 billion in a round led by Greenoaks Capital Partners that would value the startup at $30 billion, Bloomberg reported.

That’s a sixfold increase from the $5 billion SSI was valued at back in September, per Reuters. SSI, co-founded by OpenAI‘s former chief scientist Ilya Sutskever, is looking to develop safe artificial intelligence systems, but isn’t generating revenue and doesn’t even intend to sell an AI product in the near future. So, a company with no revenue or product has increased its valuation $5 billion per month for the past five months?

None of this is even taking into consideration Thinking Machines Lab, the new startup by former OpenAI CTO Mira Murati, planning to raise $1 billion at a $9 billion valuation, per Business Insider. Since that is the startup’s first raise, no massive valuation jump can be calculated.

Of course, this sounds like a broken record, but the current trend of AI startups with sky-high valuations and little to no revenue — and sometimes even no product — must eventually come to an end. Even those with a product still need to demonstrate a viable business strategy.

VCs, who have loudly bemoaned the lack of liquidity they face thanks to a slow IPO and M&A market, are investing gobs of cash into AI startups that could take more than a decade to ever produce a return — if they ever do — due to the very much still embryonic AI market.

But like we said four months ago — it never stops.