s investors pour money into startups throughout the AI stack, valuations are skyrocketing. Despite rumblings of an AI bubble, investors claim to have a method to their madness around AI.

In the past week alone, nearly a dozen AI startups have raised hundreds of millions each at billion-dollar-plus valuations, from model providers and applications to chip development to industry-specific firms like healthcare, legal and defense.

While the fact that these eye-popping checks are becoming commonplace may seem like an indicator that the AI is overvalued, Jahanvi Sardana, partner at Index Ventures, told The Deep View that FOMO-fueled investing may be a viable path in the current market.

The meteoric growth of frontier labs like Anthropic and OpenAI provided a lesson for investors who missed their chance to get in early, said Sardana. "If you missed out on Anthropic and OpenAI, you look at this pot of gold and then you retrofit everything else into that pot of gold, just hoping that you hit that home run," she said.

• After that, the frontier was AI coding agents, she said. Tools like Cursor, Code Rabbit, Lovable, Cognition and more have raked in millions from investors seeking to capitalize on one of the most viable paths to AI ROI. However, Sardana said, now investors are trying to figure out what's next.
• This is where FOMO can be thought of as a skill, rather than a detriment, she said. "It is FOMO investing, but it's also not. It actually makes you think on your feet, think really fast and react to the market."
• Additionally, if you spread your eggs among multiple baskets, in a market like this, an investor is likely to see significant returns if even a small fraction of those eggs end up hatching.

"There are multiple paths to heaven. FOMO investing can be one, founder-first investing can be another," said Sardana. "You kind of just have to decide what game you want to play and be true to it. I don't think there's a right or wrong way of doing this job."

At Index Ventures, focusing on which companies are solving actual problems, rather than creating technology first and then finding a market fit later, is what Sardana sees as the path to success. "To me, the most important thing is weeding out the missionary founders from the mercenary founders. That comes down to: Why are you building a business? Who is your customer? Why do they care?"

Our Deeper View

It's undeniable that there is a lot of overvaluation happening in the AI industry. As Sardana said, of the hundreds of AI startups raising millions to billions of dollars, the ones that make it are likely going to be the ones that are clearly doing something worthwhile. The desire to solve a pressing problem is where the most powerful innovation lies. For instance, with recent increased focus on AI efficiency, startups have emerged throughout the stack that are helping solve foundational problems, from the energy to power AI to the architecture of the model. The result could have wide-reaching benefits, both for the industry and society more broadly. That's what VCs are betting on and that's why we're seeing so much investment pouring into this sector of the economy.