The hype around AI is fueling venture capital gains, accounting for more than 60% of the increase in total venture-backed valuations, according to PitchBook. Pitchbook lead VC analyst Kyle Stanford joins Catalysts to discuss the trend ahead of the second quarter earnings season.

"If you look across the broad range of companies that are tagged as AI that are receiving funding, obviously there are some high, outstanding companies that are able to command the large valuations and are likely going to grow into it. On the flip side, when there's a huge amount of interest in the market, there's going to be companies that are able to slap AI on their business model, say that they're using it, or developing a new technology when they're actually not," Stanford explains. He notes that the Series A valuation for AI companies is nearly 30% higher than the rest of the market, which he believes is contributing to some of the "sloppiness" happening in the venture capital ecosystem.

However, Stanford stresses that venture capital firms are still very interested in AI, explaining, "right now, what everyone's looking for is efficiency. They're looking for automation. And AI is what is building that." As the second quarter earnings season quickly approaches, he urges investors to not be let down if companies don't see their AI investments materialize: "One quarter is not going to be the telltale sign of which companies are able to prove out their AI playbook... AI is going to be the long-term growth story of the market."

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This post was written by Melanie Riehl