Google DeepMind CEO Warns AI Startup Bubble Is Forming As Early-Stage Firms Raise Tens Of Billions Before Launch

Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) subsidiary Google DeepMind CEO Demis Hassabis cautioned that some AI startups are massively overvalued, signaling a potential market correction amid a surge of early-stage funding.

AI Startups Raising Tens Of Billions Without Revenue

On Tuesday, Hassabis, speaking on "Google DeepMind: The Podcast", said many AI startups are raising tens of billions in valuations before fully launching their products.

Some startups "basically haven’t even got going yet," he said. "It’s sort of interesting to see how can that be sustainable. You know, my guess is probably not, at least not in general."

Big Tech Investments Backed By Real Business

He distinguished between these hyped seed-stage companies and established tech giants, noting that large firms like Google have "a lot of real business" underpinning their AI investments.

Hassabis added that AI is "overhyped in the short term" but "still underappreciated in the medium to long-term."

Hassabis also pointed out that technological shifts often swing from skepticism to obsession, inflating valuations quickly.

"It’s almost an overreaction to the underreaction," he said, reflecting on DeepMind's own early days when few believed in the company.

See Also: ‘I’m Always In A State Of Anxiety’ Says Nvidia CEO As $5T Triumph Still Feels Like ’30 Days From Going Out Of Business.’

AI Market Remains Stable Despite Startup Volatility

Despite recent stock declines in companies like CoreWeave Inc. (NASDAQ:CRWV), Goldman Sachs Asset Management maintained that the broader AI sector remained healthy.

Sung Cho, co-head of public tech investing, said fears of a debt-fueled bubble were overstated, noting that 90% of AI infrastructure funding came from corporate cash flows.

He described recent stock drops and supply chain issues at some firms as isolated incidents rather than systemic risks.

Meanwhile, French startup Mistral launched its Mistral 3 AI model suite, featuring a large multimodal, multilingual model and nine smaller customizable models.

By releasing open-weight models, Mistral allowed users to run AI on their own hardware, positioning itself as a challenger to OpenAI and Google.

The launch coincided with reports that OpenAI CEO Sam Altman declared a "code red" internally due to intensifying competition.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo courtesy: Shutterstock/Nicoleta Ionescu