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SoftBanks AI-Focused Vision Fund 2 May Actually Be Dangerous for AI

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Common sense tells us that when something grows too fast, its usually not a good thing. And thats exactly what the bubbly space ofartificial intelligencelooks like right now.

In the past five years, the number of privately-owned AI companies that received venture capital funding havegrown more than 500%, and the average funding size has almost tripled. And despite industry insiders repeated warning of a forming AI bubble, the frontrunners in this cash-pumping game have shown no signs of slowing down.

SEE ALSO:What Microsofts $1 Billion Investment in OpenAI Could Achieve

Last month, Japanese investment powerhouse SoftBank Group, which turned Silicon Valley upside down in 2017 and 2018 with its$100 billion Vision Fund,announced that it was ready to launch a second Vision Fund and alreadyhad $108 billion securedfrom upstream investors.

Unlike the first Vision Fund, which touched private companies in a wide range of industries, the Vision Fund 2 will focus exclusively on AI companies.

At $108 billion, that commitment would be equivalent to the total VC dollars raised by U.S. companies in all industries last year and five times the amount of venture capital going into AI companies globally, per calculations byThe Wall Street Journaland theMoneyTree reportfrom PwC and CB Insights.

While its one thing to have the money ready to fuel an emerging technology like AI, it quite another to know whether the pace of technological advancement will actually catch up with investors untamed enthusiasm.

Riding a wave of media craze over AI, businesses increasingly label themselves as AI companies to woo customers as well as investors.

Its very clear that [AI] has become a marketing thing, Philipp Gerbert, a Germany-based AI expert with Boston Consulting Group, said in a recent interview with theJournal.

Earlier this year, a study of roughly 3,000 companies in Europe found that only half of the self-described AI companies actually had valuable AI technology. Similar findings were seen in China, too, where A.I. was thought to be a core component in the Chinese governments Made in China 2025 mission. Former Google executive-turned-venture capitalistthat hed seen extreme cases such as an underwear manufacturer branding itself as an AI company, which he said was abnormal.

That said, SoftBank founder and CEOMasayoshi Sonis too much of an optimist to be distracted by those worries.

Within 30 years, definitely, things will be flying,Son told CNBCin March. Things will be running much faster without accident. We will be living much longer, much healthier. The diseases that we could not solve in the past will be cured.

Also speaking to theJournal, San Francisco-based entrepreneur Chris Nicholson, CEO of deep learning startup Skymind, said hes excited about the technological progress SoftBanks new mega fund could bring about, but hes doubtful on how fairly AI companies would be valued from a business standpoint.

Now we have $100 billion that are set to chase and support AI, and they obviously wont be investing in Google and Microsoft. So this will create new centers of AI progress. And thats healthy, he said. I have no doubt this new fund will accelerate the development of AI. The question is, who is going to value these startups higher than SoftBank? Whats the exit plan?

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