New York — Billionaire private equity titan Orlando Bravo, co-founder of Thoma Bravo, says the artificial intelligence sector has entered “bubble territory,” drawing parallels to the dot-com era — though with one critical difference: this time, the money is coming from companies with deep pockets and strong balance sheets.
Speaking Tuesday on CNBC’s Squawk on the Street, Bravo cautioned that today’s AI company valuations are far detached from realistic financial performance.
“Investors can’t value a $50 million annual recurring revenue company at $10 billion,” Bravo said. “That company is going to have to produce a billion dollars in free cash flow to double an investor’s money. Even if the product and market are right, that’s a tall order.”
A Market Fueled by Excessive Optimism
Bravo’s comments come amid a frenzy of capital flowing into AI startups and public companies alike.
OpenAI, the maker of ChatGPT, recently closed a secondary share sale that valued the company at $500 billion, despite projected 2025 revenue of just $13 billion. Meanwhile, Nvidia — the dominant supplier of AI chips — announced plans to invest up to $100 billion in OpenAI to help it build supercomputing facilities and lease high-performance processors.
Other companies riding the AI wave have also seen explosive growth. Palantir now boasts a market capitalization of $437 billion, placing it among the 20 most valuable U.S. public companies. Similarly, AppLovin, an AI-driven ad-tech firm, has surged to $213 billion in value.
Even at the earliest funding stages, sky-high valuations are becoming the norm. Thinking Machines Lab, an AI infrastructure startup, recently secured a $2 billion seed round that valued it at $12 billion — a figure Bravo says would have been unimaginable just a few years ago.
‘Different from the Dot-Com Crash’ — But Still Risky
Bravo — whose firm manages more than $181 billion in assets and is heavily invested in enterprise software and cybersecurity — compared the current AI boom to the late-1990s internet bubble. However, he noted that today’s investment landscape is more stable thanks to the participation of established corporations rather than speculative retail investors.
“Now you have some really big companies and some healthy balance sheets financing this activity,” he said. “That’s different than what happened roughly 25 years ago.”
Still, Bravo cautioned that even with corporate backers, AI economics remain unproven. Turning massive hype into sustained profitability requires flawless execution, operational discipline, and — most importantly — realistic valuation models.
Reality Check for the AI Gold Rush
Analysts echo Bravo’s warning that the sector could face a correction if growth expectations don’t materialize. While AI technology has already reshaped industries from cloud computing to defense, the speed of investment has outpaced the sector’s ability to generate near-term returns.
Bravo’s comments add to a growing chorus of caution from investors who fear that AI optimism could outstrip fundamentals — a familiar story for those who lived through the dot-com crash.
For now, though, Wall Street seems content to keep betting big on artificial intelligence — and Bravo’s warning may serve as the first loud alarm before the market takes notice.
