Why Google DeepMind CEO Demis Hassabis thinks the AI startup valuation model is breaking

Google DeepMind CEo Demis Hassabis has once again warned that the present wave of AI startup valuations is unsustainable. He also raised concerns that there are chances that the tech sector is heading towards a correction. Speaking on Google DeepMind: The Podcast, Hassabis said many early-stage companies are now raising tens of billions dollars before even launching product. He believes that this trend exposes cracks in the valuation model. “Some startups basically haven’t even got going yet,” Hassabis said. “It’s sort of interesting to see how can that be sustainable. My guess is probably not, at least not in general.” This increase in speculative funding has drawn comparisons to past bubbles, such as the dot-com boom and the crypto frenzy, where companies raised massive sums on hype rather than proven business models.

Big tech vs early-stage hype

Hassabis emphasised that these seed-stage valuations with investments by established companies like Google, which he said are backed by “a lot of real business.” While Big Tech’s AI bets are supported by revenue streams and infrastructure, many startups are relying solely on investor enthusiasm.




He added that AI is “overhyped in the short term” but “underappreciated in the medium to long-term,” suggesting that while the technology’s potential is profound, the current funding frenzy may not reflect sustainable growth.

Reflecting on DeepMind’s own early days, Hassabis noted how technological shifts often swing from skepticism to obsession, inflating valuations quickly. “It’s almost an overreaction to the underreaction,” he said, pointing out that investor sentiment can flip dramatically once a technology gains traction.

Demis Hassabis makes his stand clear on AI scaling

Recently, Google DeepMind CEO also made his stand clear on the debate over how far AI scaling laws can take the industry.As reported by Business Insider, speaking at the Axios AI+ Summit in San Francisco, Hassabis said that scaling current systems must be pushed to the maximum, calling it a critical path towards artificial general intelligence (AGI). “The scaling of the current systems, we must push that to the maximum, because at the minimum, it will be a key component of the final AGI system. It could be the entirety of the AGI system,” Hassabis told the audience.

AGI is still a theoretical form of AI which is capable of reasoning as well as humans. AGI is also the ultimate goal for leading AI companies that are driving billions in spending on infrastructure and talent. Scaling laws suggest that the more data and compute an AI model receives, the smarter it becomes.