In recent years, a number of high-profile AI startups—backed by leading AI investors—have faced significant setbacks, with some incurring losses in the hundreds of millions of dollars even after promising early traction and ambitious valuations.

These developments serve as a cautionary signal to the global AI investment community: in a landscape defined by rapid innovation and media-fueled excitement, conventional due diligence practices are no longer sufficient. The AI sector, in particular, has become increasingly vulnerable to hype, with some startups overstating their technological capabilities—often relying on hundreds of human coders behind the scenes while promoting their solutions as fully autonomous AI systems.

As the old adage goes, “Anyone can sell snake oil, but not everyone is selling the real deal.” Distinguishing genuine innovation from inflated claims is more critical than ever for investors seeking sustainable, long-term value in the AI space.