According to news on October 25, when the artificial intelligence startup OpenAI transformed from a non-profit organization to a "caped-profit" company in 2019, Silicon Valley venture capitalist Vinod Khosla took the first bold step. His Khosla Ventures invested $50 million in OpenAI, its largest investment in its 15 years of existence.

Khosla has firmly believed that artificial intelligence is a transformative technology since at least a decade ago. But at the beginning of this year, Khosla saw a flood of investors suddenly wanting to back any AI company they could get their hands on.

"I think most people will come back from the Christmas break and say, we missed the boat (OpenAI), now let's get on a small boat in time and paddle hard!" Khosla said in an interview.

But at that moment, Khosla decided to do something that would serve him well throughout his long career: withdraw most of his investments in artificial intelligence and row in the opposite direction.

"Most AI startups are valued in the hundreds of millions or billions of dollars, and they will correct themselves because more winner-take-all situations happen than we realize. Investing in hot trends is a bad idea," Khosla explained.

Khosla, 68, founded Sun Microsystems in 1982 and played a key role in the early development of AMD and Juniper Networks. He spent 18 years at Kleiner Perkins Caufield & Byers before launching his own Khosla Ventures in 2004. There, Khosla made early bets on Affirm, DoorDash and Instacart, investments that helped his net worth soar to $6.2 billion, according to Forbes magazine.

Khosla is one of the few top VCs actively investing in the current market, and has been through other cycles of change that he believes will compete with artificial intelligence, such as social media, mobile devices and personal computers.

"If you go back to the 1980s, there were thousands of software companies, but only a few big winners. Most people and most companies lost everything," Khosla said. "I think the same thing will happen in artificial intelligence."

Khosla said he is making "a lot of fundamental investments in esoteric areas" rather than artificial intelligence.

Data compiled by PitchBook, a research organization focusing on private equity and venture capital, shows that although the total transaction volume of startups fell by 31%, financing for global artificial intelligence companies increased by 27% year-on-year in the third quarter.

Khosla wouldn't say which AI companies he's passed on, but he wasn't involved in recent rounds of funding for startups like Anthropic (valued at $30 billion), Character.ai (valued at $5 billion), HuggingFace (valued at $4.5 billion) or Adept (valued at $1 billion).

Khosla was careful to note that he wasn't avoiding all AI startups. Khosla Ventures earlier this year invested in Replit, a generative AI tool for software development, at a post-money valuation of $1.16 billion.

And there's OpenAI itself, which arguably benefits from the AI ​​hype as much as any startup. According to Bloomberg, the company is in talks to sell some of its existing shares at a valuation of $86 billion.

Khosla declined to comment on the OpenAI share sale or confirm or deny any reports of valuation. But he did say that, using OpenAI as an example, he thinks the hype is justified when you see the company growing so fast. It is reported that in just a few months, OpenAI’s annual revenue increased from US$1 billion to US$1.3 billion.

"Investing in fundamentals is different from being a sheep that goes with the flow," Khosla said. "I'm arrogant because I don't like to listen to other people."