Onome Amuge
A trillion dollars of paper wealth has appeared almost overnight; not in oil, gold, or crypto, but in artificial intelligence (AI). According to a new Financial Times analysis, ten unprofitable AI start-ups have collectively gained nearly $1 trillion in valuation over the past year, driven by an unprecedented flood of venture capital into a technology seen as both transformative and speculative.
The report, which names OpenAI, Anthropic, and Elon Musk’s xAI among the biggest winners, observes a sector where investors are chasing potential rather than profit. Smaller players like Perplexity, Anysphere, Scale AI, Safe Superintelligence, Thinking Machines Lab, Figure AI, and Databricks have also seen valuations rise, even as their balance sheets remain deep in the red.
This rush has triggered a familiar question across global markets; and increasingly, in Africa’s growing technology circles: “Are we witnessing innovation’s next great leap, or inflating another speculative bubble that will leave investors and innovators bruised?”
Venture capital investment in AI has reached historic levels. U.S. firms have poured about $161 billion into the sector in 2025 alone; roughly two-thirds of all their total funding. According to the report, if that pace continues, AI spending could exceed $200 billion by year-end, surpassing the inflation-adjusted peak of the dot-com era. To put it in perspective, investors spent about $20 billion on internet start-ups in 2000, the year the dot-com bubble burst.
The new AI boom dwarfs that episode, both in absolute value and in expectation. The difference, analysts say, is that AI touches nearly every industry; from finance and healthcare to logistics, energy, and even creative work. Yet beneath the optimism lies the fear that most of these start-ups are not profitable, and some are generating only a few million dollars in annual revenue despite sky-high valuations.
The FT research found examples of early-stage AI firms with $5 million in annual recurring revenue asking for $500 million valuations, implying 100 times revenue multiples, far above even the peak of 2021’s software frenzy.
The optimism driving these valuations is being echoed by major venture names. Hemant Taneja, CEO of General Catalyst, argues that bubbles play a creative role, as they align money and talent in a way that accelerates technological progress. Salesforce chief executive Marc Benioff went even further, claiming AI could unlock $10 trillion in new global value despite near-term losses.
But beneath the cheerleading lies growing anxiety about sustainability. The FT report warns that private overvaluation could soon spill into public markets, where chipmakers, cloud providers, and software giants have already seen stock prices soar on the back of AI enthusiasm.
Nvidia, AMD, Broadcom, and Oracle have added hundreds of billions of dollars to their combined market capitalization since early 2024. Their fortunes, however, are closely tied to AI start-ups’ spending on computing power. If capital inflows slow or valuations deflate, the ripple effect could hit these public giants hard.
For many analysts observing from Nigeria and other emerging economies, the spectacle unfolding in Silicon Valley feels oddly familiar. The mismatch between technological promise and market fundamentals mirrors the cycles that African tech ecosystems have themselves endured; from the fintech hype of 2020–2022 to the crypto bust that followed.
In Nigeria, where investor sentiment has cooled after a post-COVID funding boom, analysts say the AI frenzy offers valuable lessons.
Unlike Silicon Valley, Africa’s challenge isn’t overvaluation, it’s undercapitalisation. Local start-ups often struggle to raise even modest pre-seed or Series A rounds, and infrastructure deficits make AI adoption difficult at scale. Yet, this may also shield the continent from the excesses of speculative global capital.
Nigeria, Africa’s fourth largest economy and most active start-up hub, is already witnessing growing interest in AI-driven solutions, from Lagos fintechs using machine learning for credit scoring, to agritech platforms applying predictive analytics in farming. But unlike the U.S., where billions are funneled into long-term bets on general intelligence, Nigerian innovators are focusing on applied AI systems that solve practical, revenue-generating problems.
For investors, the parallels with the dot-com era are sobering. Two decades ago, the collapse of overvalued internet stocks wiped out trillions in paper wealth. Yet from that wreckage rose enduring platforms including Amazon, Google, and PayPal among them, that redefined global commerce.
Some analysts believe the AI boom will follow a similar trajectory. Many ventures may disappear, but those that survive could reshape industries and redefine productivity.
Still, for policymakers in emerging economies, sustainable innovation is seen to require more than speculative capital. It demands strong digital infrastructure, skilled talent, and long-term investment incentives that allow technology to grow organically.
For now, the AI wave continues to swell. OpenAI reportedly generates $13 billion in annualised revenue, less than three years after launching ChatGPT. Yet its expenses from model training to massive data center investments, mean profitability remains elusive.
Its rivals, including Anthropic, Meta, and Alphabet, are also pouring billions into research and compute power, betting on a future where AI becomes indispensable to every business function.
Despite the risks, Wall Street remains optimistic. For emerging markets like Nigeria, the takeaway may be less about hype and more about timing including how to invest in AI not at the peak of speculation, but at the foundation of transformation.
