Why paying up for AI startups isn't always irrational: the reflexivity loop
FinanceYF5 · x · 2026-10-06
Part of a thread on AI investing:
On reflexivity: rapid revenue growth drives valuations up, which attracts better talent and more capital, further accelerating growth. But when momentum investors chase gains without fundamentals, the same loop amplifies a bubble until reality forces a correction.
On paying high prices: a higher entry price doesn't necessarily mean irrational bidding. If an investor believes a company's addressable market is far larger than consensus, "overpaying" may simply reflect seeing the market expand earlier than others.
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