Popular VC Bill Gurley on Anthropic and OpenAI: The way these companies are run is scary, as they are ...

Benchmark general partner Bill Gurley is scared of all the cash burning happening around by Artificial Intelligence (AI) companies. An early investor in Uber, Benchmark’s Gurley played a key role in the exit of the then-Uber CEO Travis Kalanick in 2017.

Gurley said that Uber’s annual burn rate of $2 billion during his involvement was “high anxiety” as he pointed to the much higher numbers from today’s technology companies. Gurley is seen as a heavyweight player in Silicon Valley after decades of making bold bets on emerging tech companies. He is known to have seen enough tech cycles in his venture capital career to clearly understand and tell that nothing goes up and to the right forever.

In an interview on CNBC’s Money Movers, Gurley said that the massive AI infrastructure spending frightens him. And what scares him more is massive Capital Expenditure (CE) by companies that are still to start making profits. “God bless them,” Gurley said of AI companies like Anthropic and OpenAI that are burning through cash. “It’s a scary way to run a company,” he said. He made the comments when asked about the huge expenditure planned by technology companies on AI infrastructure.

Tech companies are spending at record rates, due to massive investments in AI and soaring memory costs. AI spending for Amazon, Facebook-parent Meta, Google and Microsoft is projected to be about $700 billion this year, a number that has psyched analysts and investors.

Incidentally, this is not the first time that Gurley has spoken about cash burn. "I do think that there will eventually be a correction," Gurley said in a new episode of Yahoo Finance's Opening Bid Unfiltered podcast last month.

"And one of the reasons that I feel strongly about that is that so many of the players, so many of the competitors, especially the deep pocketed venture [backed], ones that have raised tons of venture capital, they're losing massive amounts of money.

" "More than Uber ever lost, which was a lot and more than Amazon ever lost," he added. "And so the burn rates are bigger than they've ever been in the history of venture capital.

And eventually they're going to want to bring those in," he added.Gurley further said, "These companies then have to do what Uber did, which is transition from losing money to being cash flow positive. And as they do that, the pricing for these products is going to shift. And I just feel like that's going to be a moment of a correction."

Reset is coming in AI industry

Gurley agrees with all the talk of the artificial intelligence (AI) bubble. He said that he sees an AI Bubble, but at the same time an AI “reset” too is coming.

“When people get rich quick, a whole bunch of people come in and want to get rich too, and that’s why we end up with bubbles,” Gurley said. The venture capitalist also had advice for investors on what they need to do to ensure they are not caught unawares when AI Bubble reset happens.

He said that when the reset happens, investors should have a price in mind for beat down software-as-a-service stocks, “and start gobbling them up.”Gurley referenced economic scholar Carolta Perez, who wrote, “Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages,” and noted that “bubbles only exist when the actual wave is real.”