Vinod Khosla, who invested $50 million in OpenAI early on, says most AI valuations are wildly overhyped and warns that powerful AI in Chinese hands poses a geopolitical risk. He backs green tech bets like sustainable aviation fuel and fusion energy as trillion-dollar markets that reward patient capital.
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Julia Borsten is out west sitting down exclusively with tech venture capitalist and co-founder of Sun Microsystems, Vinod Khosla. Julia, take it away.
Thanks so much, Brian. And Vinod Khosla, a legendary investor at Khosla Ventures, thank you so much for joining us here today.
Great to be here.
So, Vinod, you were one of the earliest investors in OpenAI. You put in a $50 million check back in 2019. What is your outlook now on AI valuations and which companies are best positioned to succeed? Lead in the AI space over the long run?
Well, AI will have a large impact on society and it's a 20-year run. So a lot of value to be created. But there is also a lot of hype and most valuations are overhyped. So I would say most are too high. The ones— and one has to pick really, really carefully. Most companies will lose money. But more money will be made than lost.
For the companies that you're betting on now to succeed, how essential is it for them to partner with the tech giants? Obviously, OpenAI has this big partnership with Microsoft. Is it possible for earlier stage AI investments to succeed without a major tech giant ally?
I do believe it is. I do believe they can help themselves by partnering with various giants, but it's not the only way to build a successful company.
So I understand that you just came out with a new thesis on regulation in China, especially when it comes to this question of AI. What's your perspective on AI regulation and the potential ripple effect?
My view is we have to be very, very careful. The much bigger danger is not AI as a dangerous thing, though there is some dangers there. Much bigger danger is powerful AI in Chinese hands. And between the US and China or Western nations and China, whoever wins the AI race will win the techno-economic war and hence global influence. I think the 4 biggest danger— 4 big— the big danger we have is China. And with a powerful tool like better AI.
But are you saying that there shouldn't be any AI regulation or just needs to be careful?
I think we need to be careful. I think Some regulations always needed. But the biggest danger we have is falling behind China in AI.
Interesting. And I want to make sure to ask you about the, the IPO market. You were an investor in Instacart. We were just talking before they came to us about how the Instacart valuation has come down dramatically. Do you think the IPO market is reopening now? Is this the start of a new, a new open window for IPOs?
I do see a lot of interest in IPOs recently. Now, valuations will go up and down. It's very hard to predict. But when you're an early investor— we were the first investor in Instacart at a $10 million valuation. So whether it's $10 billion or $20 billion, it really doesn't matter. And in fact, whatever number it comes out at will change a year from now and 2 years from now. So taking the long term, investing in the right things is more important than the short-term perturbations in valuation.
So speaking of investing in the right things, you're making a lot of bets in the green tech space. What are the companies that you think are going to be successful over the long term when it comes to green tech, especially in light of some concerns now about ESG investing as a whole?
Well, ESG investing has nothing to do with a company like Lanzatec. Sustainable aviation fuel is a massive multi-hundred billion dollar market. And the first company to beat it, and Jennifer Holmgren, the CEO, is fabulous at it. Will, will do really, really well. It's a public stock and I just visited their Gent facility in Belgium 2 weeks ago where they're just starting up that facility. So if you bet on the right markets long term, short term, public— but perturbations don't matter. And Lanzatec is a great example of that. We are also investors in QuantumScape. So batteries for cars is a huge market. So very, very promising area. I'm of course invested, invested in Conwell Fusion, which is a really exciting market. Again, multi-trillion dollar market. These are markets larger than Google's market.
