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How I Invest · 3 min · Nov 4, 2026
AI can produce strong returns without trillion-dollar exits
Jack Selby argues that AI may help companies reach revenue and viable outcomes faster, even as the investment boom corrects.
The episode’s best minutes
Full analysis- 32:21Cheap capital left venture with zombie funds6 min
- 42:27AI can produce strong returns without trillion-dollar exits3 min
- 18:36Lower entry prices change the venture return math3 min
- 3 more moments in the full episode
“AI enables companies to be built much more cheaply, achieve revenue much more quickly, get to good outcomes much more quickly”
Takeaways
- AI-heavy infrastructure makes this boom more capital-intensive.
- He expects the AI market to correct and erase substantial value.
- Smaller outcomes can still generate good venture returns.
About this segment
Jack Selby argues that AI may help companies reach revenue and viable outcomes faster, even as the investment boom corrects. He rejects relying on rare, enormous exits to make venture returns work.
Jack Selby is a Managing director at Thiel Capital, early PayPal team member, and Clarium Capital cofounder.
Joined PayPal as an original employee, led international operations, and co-founded Clarium Capital with Peter Thiel.
David Weisburd, Host
From “Peter Thiel's 27-Year Partner on the AI Bubble, the Venture Capital Crisis, and the PayPal Mafia”, Nov 4, 2026. Watch the full episode
Answers “Is AI a bubble?” See all 30 answers
Thanks. We'll look at and fix what's off.
Transcript
From the transcript How I Invest publishes with the episode.
- 42:39
The AI boom that is happening right now and has been going on for many years, it's very different, say, than the Internet period when we were putting together PayPal in the sense that the current market is very CapEx intensive. So you have energy needs. You have chip needs. You have data center needs. The list goes on and on on. You basically had none of that during the PayPal days, the doc... The .com days.
- 43:03
And so because of the CapEx intensity, you have a tremendous off the charts amount of storytelling to essentially fuel the fundraising. And so when this kind of cycle corrects... And, like, Cliff Asness, he was on your show not too long ago. He said it perfectly. Like, it's it's never different this time. Like, this will correct. And when it corrects, there's going to be tens, if not hundreds of billions of dollars that are going to get zeroed.
- 43:38
It's just a fact. It's an absolute fact. And I would actually... I would challenge in saying that anyone who doesn't believe that there's an AI bubble is an absolute contrarian today. Like, that just seems like a ludicrous proposition. Like, it is such a clear consensus that? Whether it's the circular trading or the valuations, the multiples. I mean, the list goes on and on. Because two things could be true at once.
- 43:59
One is 90% of companies could be overvalued, and, also, the expected value of the vintage could still be high. I think that's what a lot of investors are trying to grapple with what... They get that all these pre revenue companies can't be worth under a million dollars or a billion dollars, But they also are unclear, I think, whether there's gonna be another one, two, three trillion dollar company in the batch.
- 44:21
And I think probabilistically, it's it's probably very pessimistic to assume that the first three years of AI produced two arguably $3,000,000,000,000 companies, and now we're not... Now it's game over. No no more trillion dollar companies. I respectfully disagree because I think there is an angle where AI enables companies to be built much more cheaply, achieve revenue much more quickly, get to good outcomes much more quickly, and generate good, if not great venture capital returns without the fixation of, oh, I have to go build an ex trillion dollar company.
- 44:57
Because I think people are so caught up in the zeitgeist of SpaceX and Anthropic. These are once in a generation, if not once in a lifetime type companies. And the idea that they come around with any sort of regularity, I think, is ludicrous. And we have to move away from that because if that's what you're pitching, you're again pitching something that's outrageously improbable that you're gonna find at an early stage, and then the duration is gonna be very extended.
- 45:22
And that's a poor combination. And so that's why I I fundamentally disagree with that kind of perspective. AI, again, those two things being equal, is an amazing tool, but what about building great