In the venture capital world, the word “bubble” usually serves as a warning shot—a signal to pull back before a market correction wipes out portfolios. But at the recent Fortune Brainstorm AI conference, two top investors argued that when it comes to artificial intelligence, a bubble might be exactly what the industry needs.
During a panel moderated by Fortune’s Allie Garfinkle, Kindred Ventures founder Steve Jang and Sapphire Ventures partner Cathy Gao tackled the question dominating Silicon Valley: Are we in an AI bubble? The answer was, in short, maybe, but that’s the wrong question to ask.
“I think it is a bubble, but bubbles are good for innovation,” said Jang. He argued that the term “bubble” is often just finance shorthand for a “new technology wave” that occurs every five, six, seven years. According to Jang, this market heat is functionally necessary: “You need a bubble in technology and startups … to not only attract the world’s best talent to work on a certain set of problems but you also need the capital to fund them.”
Jang pointed to the exodus of top engineers from stable roles at tech giants like Google, Meta, and Uber to launch startups as a “good signal” rather than a warning sign. While admitting that “bubbles popping are bad,” Jang suggested that as long as the media continues to question the market, it helps “release pressure” and keeps the ecosystem healthy.
