Anand Iyer of Canonical Crypto and Kelvin Koh of Spartan Group painted the current environment as a post-hype phase for decentralized AI protocols, according to the report. Capital and talent are showing greater interest in more focused, utility-driven applications.
“I think we’re in the trough right now,” said Iyer, whose company invests in early-stage infrastructure and applications built on decentralized networks, per the report. “We went through a frothy period. Now it’s about figuring out where the real strength lies.”
Iyer and Koh were critical of what they said they view as overinvestment in GPU marketplaces and efforts to construct decentralized alternatives to large AI models like the ones from OpenAI or Anthropic, according to the report.
The capital needed is “night and day” versus the money available in crypto, Koh said, per the report. They instead see potential in AI tools that begin by focusing on a specific problem.
Their comments came two days after it was reported that there has been a shift among crypto venture capital funds to other opportunities, including stablecoin infrastructure, prediction markets, FinTech and AI.
Driving the change is a decline in the price of digital assets that has seen bitcoin lose close to half of the record-high price it reached in October, and altcoins losing as much as 70% of their value over the last year.
At the same time, crypto-native funds are seeing increasing competition from traditional venture capital funds in areas such as prediction markets and stablecoins as Wall Street becomes more focused on those areas.
Meanwhile, PYMNTS examined funding for the AI sector this week. While venture capital kept flowing into AI during the first weeks of February, the targets are shifting, with investors now focusing on the “durability and economics of the technology” rather than simple scale.
“Several of the largest raises centered on the technical foundations required to make AI systems faster, cheaper and more trustworthy at scale,” the report said.
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