Top VC explains why he thinks the sky-high valuations of AI companies aren't justified, predicts 'a lot of destruction'

• Josh Wolfe of Lux Capital questions the long-term value of artificial intelligence investments.
• AI spending is up, and startups are securing valuations worth hundreds of millions.
• Wolfe highlights a gap between AI companies' revenue and the economic value needed for returns.

The tech industry is buzzing with talk about the value of artificial intelligence, but not all investors are convinced it will pay off.

Lux Capital venture capitalist Josh Wolfe appeared on "The Logan Bartlett Show" to talk about investing and the future of AI. From startups to Big Tech, countless companies have been investing in the new technology.

But Wolfe said he isn't so sure about those that have been able to raise hundreds of millions in funding.

He said he doesn't believe these companies churning out AI tools will be game changers, "nor do I think that the valuation is justified."

The VC said he uses AI image generator Midjourney to express his emotions and ChatGPT to break down scientific concepts, but a "massively saturated" market means not every AI service will thrive.

Wolfe identified a large gap between the revenue of companies like OpenAI and the $250 billion to $400 billion economic value that needs to be created to see a return on investments.

"Four or $5 billion of revenue is far short of $200 billion of economic value that has to be created, so I think there's going to be a lot of destruction," he said.

A Lux Capital representative said that Wolfe was unavailable to respond to a request for comment from Business Insider.

It seems like AI startups are popping up all over the place, and they've impressed many investors enough to back them. Meanwhile, Big Tech companies like Amazon, Microsoft, Google, and others have ramped up AI spending to $1 trillion to leverage its momentum into profits.

Still, any game-changing payoffs of these investments are yet to be seen.