Indian American venture capitalist Vinod Khosla shared a grim forecast for the markets — predicting a collapse in valuations. The billionaire businessman told Nikhil Kamath during a recent podcast episode that a vast majority of investments were likely to lose money in 2025, but noted the possibility of long-term opportunities.
He also predicted a long-term global shift towards a ‘deflationary global economy’ — possibly starting in the 2030s.
“Money will be worth a lot less…Hold equity, not debt. Hold equity, not cash. Or real estate, not any other asset class,” he urged. entrepreneurs and investors.
AI bubble in the making?
“I know you don’t believe in bubbles per se, but as an investor, you’ve seen the many cycles, many more than I have. Do you think we could be in a bubble today in overestimating– I’m not saying overestimating the change, but the pace or the rate of change?” Kamath asked the venture capitalist.
Khosla noted in response that nearly every opportunity-rich space created a bubble — citing the dot com frenzy in 1998.
“To me, the reality is Internet traffic, miles of railroad bed, AI applications. AI valuations isn’t something I worry about…but there surely will be a bubble. almost certainly…or we are in one,” he said.
Khosla predicted that even in 2025, the “vast majority” of investments will likely lose money, stressing the need to make the ‘right’ investments. The billionaire businessman also noted that recent developments would also bring “many more opportunities than we’ve ever seen before” — which could be “good news” for entrepreneurs.
“I might even guess north of 80% of investments…more money will be made than lost. Of the next thousand startups, 990 can lose money, and you can still make money by investing in the right portfolio. So…I do think we will see that. I do think we will see a collapse in valuations,” he warned.
What is the future of AI?
Khosla noted that it was not access to AI but the human choices that shape how AI is used which would set some startups apart. He also predicted a radically lean future within the next 10 years — “we will see a company with a billion dollars of revenue that has only 10 employees”. He also broached the possibility of using AI to power public services in India — providing large scale, free or near-free education, healthcare, legal services, and financial advice, delivered through government-backed platforms.
“If every child in India has a free AI tutor… it’ll be better than the best education a rich person can offer…If I was PM Modi, I’d be doing everything I can to get those as common services,” he added.