Social Capital founder and venture capitalist Chamath Palihapitiya suspected on Thursday that much of the AI companies’ revenues come from other AI firms that are themselves funded by venture capital.
Palihapitiya Weighs on AI Funding and Revenue
Palihapitiya quoted an X post by Social Capital showing AI and machine-learning companies captured roughly 83% of U.S. venture funding through September, up sharply from 10% in 2015.
“I suspect 70-80% of revenues at AI companies are from other AI companies who’ve raised money from the Venture industry,” he said. “This is not a circular revenue problem but it is a revenue quality problem.”
His argument is that if Company A sells compute, models or infrastructure to AI Company B, while Company B’s spending is ultimately financed by venture capital, Company A’s revenue can depend indirectly on continued VC funding of Company B.
Palihapitiya compared this dynamic to the early/mid-2010s Software as a Service funding cycle,
Growing Dependencies
OpenAI, for example, remains heavily dependent on external funding. It closed a record $122 billion funding round in March and is now reportedly seeking at least an additional $30 billion at a roughly $1.4 trillion valuation.
What’s notable is that the company has warned its own investors that its heavy dependence on Microsoft Corp. (NASDAQ: MSFT) for “a substantial portion of our financing and compute” could pose a business risk.
J.P. Morgan Asset Management’s Bill Eigen previously warned investors should watch the rate of AI growth and pointed to signs of slowing capital expenditure and private-market valuations.
Polymarket bettors, meanwhile, see little risk of an AI crash anytime soon, assigning a 7% chance of the bubble bursting this year and 17% by June 30, 2027.
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