- Veteran venture capitalist Jay Hoag criticized VCs' blind rush toward AI.
- The cofounder of TCV likened the behavior to "seven-year-olds playing soccer."
- Hoag also expressed concern about the "enormous" sums poured into startups during the 2020-2021 tech boom.
Veteran venture capitalist Jay Hoag thinks the AI investing hype has gone too far.
The TCV cofounder criticized what he sees as VCs' blind rush toward AI.
"Money sort of chases momentum or follows perceived momentum," he said on an episode of the "Invest Like The Best" podcast published Tuesday.
"At the risk of insult, possibly like 7-year-olds playing soccer — the ball goes over there, everybody goes over there," Hoag said.
Hoag said that the hyperfocus on AI and software as a service is diverting attention and capital away from other viable sectors, especially consumer internet, which he believes still has untapped potential.
AI is "super shiny" and "super interesting," he said. "I just have a hard time believing there are not going to be any new consumer internet businesses founded and built over the next 10 or 20 years," he added.
"I kind of wish that the AI enthusiasm hadn't distracted everybody."
Hoag has spent over four decades in tech investment. He cofounded TCV in 1995 and chairs its investment committee. The firm has backed some of Silicon Valley's biggest wins, including Netflix, Expedia, Peloton, Spotify, and Zillow.
Hoag also expressed concern about the "enormous" sums poured into startups during the 2020-2021 tech boom.
"I've worried a little bit about some of the 2020-2021 capital — which is an enormous sum — being, by and large, broken capital," he said. "I wish there was a little bit more modesty in our business."
Hoag did not respond to a request for comment from Business Insider.
AI hype train
In the first quarter, more than half of VCs' investments went to AI and machine learning startups, per PitchBook. Last year, global investments in the sector totaled $131.5 billion, up more than 50% from 2023, PitchBook's data showed.
Hoag isn't the only investor sounding the alarm bells. Daron Acemoglu, an MIT economist, told Bloomberg in an interview last year that the hype surrounding AI may not meet its lofty expectations.
"A lot of money is going to get wasted," Acemoglu said.
Veteran VC Vinod Khosla said in 2023 that most startups were overvalued and that most investments in AI "will lose money."
