Frothy AI valuations raise Australian 'bubble' fears (www.afr.com)

New data from Cut Through Venture shows valuations for AI-focused startups in Australia are rising sharply across every stage of investment — from seed rounds to late-stage deals — as venture capitalists rush to avoid missing out on the perceived AI revolution. The scale and speed of the inflows have market participants warning of a repeat of the frothy conditions seen in the 2021 investment bubble: inflated prices, intense competition to back AI names, and an increased likelihood of mispriced risk. For the AI/ML community this is a double-edged sword. On the positive side, more capital can accelerate R&D, productization, and access to compute and talent. But the technical and market implications are worrisome: valuation inflation can encourage “AI-washing,” push teams toward premature scaling and aggressive burn rates, and raise expectations for rapid revenue and evaluation metrics that many research-led projects can’t meet. Across-the-board valuation rises also distort comparables and multiples, heighten the chance of painful down-rounds or exits at depressed returns, and intensify competition for engineers and compute resources. Practitioners and investors should therefore prioritize rigorous product-market fit, transparent model metrics (performance, cost, reproducibility), and unit economics rather than hype-driven milestones.