Jay Hoag,a veteran venture capitalist and cofounder of TCV, has voiced concerns about what he perceives as an overblown hype surrounding artificial intelligence investments.

Hoag criticized the current trend, characterizing it as a “blind rush” by venture capitalists into the AI sector.

“money sort of chases momentum or follows perceived momentum,” he saeid on an episode of the “Invest Like The Best” podcast published tuesday.

Hoag likened the situation to “7-year-olds playing soccer – the ball goes over there, everybody goes over there,” suggesting a lack of strategic focus in the investment frenzy.

He cautioned that the intense focus on AI and software as a service (SaaS) is possibly drawing attention and capital away from other promising investment opportunities.

According to PitchBook data, AI and machine learning startups received over half of all venture capital investments in the first quarter of this year. Global investments in the sector reached $131.5 billion last year, marking a more than 50% increase from 2023.

“Money sort of chases momentum or follows perceived momentum.”

Hoag is not alone in expressing reservations. Daron Acemoglu, an economist at MIT, stated in a Bloomberg interview last year that the high expectations surrounding AI may not be realistic.

“A lot of money is going to get wasted,” Acemoglu predicted.

Vinod Khosla, a veteran VC, commented in 2023 that many AI startups were overvalued and that a notable portion of AI investments “will lose money.”