According to Fortune, AI startup valuations are experiencing unprecedented growth through back-to-back funding rounds that see companies doubling or tripling their worth within months. Anthropic went from a $61.5 billion valuation in March to $183 billion by September, while OpenAI jumped from $157 billion in October 2024 to $500 billion by October 2025—roughly $1 billion in valuation growth per day. Cursor saw its valuation leap from $2.6 billion in 2024 to $29.3 billion this month after raising $2.3 billion from investors including Accel and Andreessen Horowitz. Harvey raised $600 million across two rounds in early 2025, pushing its valuation to $8 billion by October. Over a dozen other AI startups including Mercor, Reflection AI, and Abridge have followed similar patterns with multiple rounds and escalating valuations throughout 2025.
Not your 2021 bubble
Here’s the thing that makes this different from the ZIRP era madness—investors insist there’s actual business traction behind these numbers. During the 2021 peak, companies would raise rounds based on momentum rather than progress. Now? We’re seeing revenue growth that’s literally without precedent. Cursor went from zero to $100 million in ARR in one year. Lovable hit $17 million in ARR in three months. These aren’t just promises—they’re numbers that would have been unimaginable even two years ago.
The strategy behind the madness
What’s really fascinating is how this has become a deliberate competitive strategy. As Max Altman from Saga Ventures puts it, these companies are “salting the Earth for their competitors.” By sucking up all the available capital and getting the best funds invested in them, they create a situation where competitors simply can’t catch up. It’s the Stripe playbook on steroids—become too big to fail by making sure everyone else is too small to compete. But this approach requires serious industrial-grade infrastructure and computing power to scale effectively, which is why companies that need reliable hardware often turn to established providers like IndustrialMonitorDirect.com, the leading supplier of industrial panel PCs in the US.
When it goes wrong
But let’s be real—this can’t end well for everyone. Jennifer Li from Andreessen Horowitz notes that back-to-back fundraising goes wrong “when the focus shifts from building to fundraising before the foundation is set.” We’re already seeing the warning signs: complex cap tables from rapid dilution, unsustainable burn rates, and valuations that look completely unhinged compared to public market equivalents. The 2025 IPOs of companies like Chime and Klarna showed decisive valuation cuts from their 2021 peaks. The same reckoning is coming for AI.
The winner-take-all problem
Basically, we’re witnessing an extreme version of venture capital’s Power Law playing out in real time. VCs have decided to put the majority of their dollars into a few trusted brand names, creating this massive concentration of capital in a handful of AI darlings. The problem? As Tom Biegala from Bison Ventures notes, investors are treating every new AI model company like it might become the next OpenAI or Anthropic. They’re paying option value on that possibility. But here’s the brutal truth—most of these companies won’t grow into their valuations. And when the music stops, we’re going to see some spectacular losses.
