Is the AI sell-off a bubble or an opportunity? YC entrepreneurs use AI to create new markets and a wave of startups.

The archetypal figure of the big short, Michael Burry, has targeted popular artificial intelligence stocks like Nvidia and Palantir for shorting, expressing a bearish outlook on the AI market, which has triggered panic in the stock market. From time to time, people follow suit and add fuel to the fire by making panic statements that AI will become a bubble. However, early investment advisors supporting OpenAI, the well-known Silicon Valley venture capital firm Y Combinator, have demonstrated the market demand for AI through tangible results. In Tokyo's Silicon Valley, three graduates of Y Combinator shared their entrepreneurial secrets, saying that AI has opened up opportunities for them to expand globally.

Three outstanding graduates of Y Combinator shared their entrepreneurial stories while discussing how AI has opened the doors to global trade for them. Their success is not only due to artificial intelligence technology but also reflects the potential for future collaboration between the United States and Japan, especially in combining America's AI capabilities with Japan's robotics and parts manufacturing. The venue was packed with over a hundred young Japanese entrepreneurs, demonstrating that for the new generation, AI is not fear, but opportunity and dreams.

Diode Computers: Innovative Opportunities for Custom Circuit Boards

Davide Asnaghi is from New York and is the founder of Diode Computers, a company focused on using artificial intelligence to design custom circuit boards (Custom Circuit Boards), with applications in high-tech fields such as edge AI, robotics, and drones. Asnaghi revealed that, influenced by the political atmosphere between the United States and China, the U.S. faces labor and technical issues when manufacturing circuit boards and humanoid robots, while China’s manufacturing restrictions have put many tech companies in a difficult position. However, in Japan, he sees a tremendous opportunity. Diode's development toolkit utilizes NVIDIA's Jetson Orin system, providing strong support for innovative circuit board design.

Greenboard: Bringing innovative solutions for financial compliance

Another entrepreneur from New York, Dave Feldman, founded Greenboard, an AI-based financial management platform. While many traditional financial institutions are cautious due to a lack of understanding of AI technology or concerns about regulatory compliance, Feldman saw a business opportunity. Greenboard focuses on developing a financial compliance operating system to address two major challenges faced by financial institutions in responding to the regulatory challenges posed by the U.S. Securities and Exchange Commission (SEC): first, incentivizing employees to build a culture of compliance, and second, maintaining reliable and actionable data for high-quality compliance assessments.

Feldman emphasized that despite the increasing level of automation globally, certain areas still require human judgment. In fields like compliance that demand subjective evaluation, AI should serve as a tool to enhance employee efficiency rather than replace their jobs. Greenboard secured $4.5 million in seed funding in May 2024, led by Base 10 Partners, with follow-on investments from several venture capital firms, including Y Combinator.

Kai Brokering: The AI Adventure of Young Entrepreneurs

Kai Brokering, born in Tokyo, moved to the United States at the age of fifteen, interned at NASA Langley Research Center, and worked as an engineer at Rakuten. However, he did not want to become a typical Japanese salaryman and decided to abandon a stable career to pursue entrepreneurship. Despite facing challenges early in his startup journey due to his youth, Brokering applied to Y Combinator as many as five times, ultimately succeeding. He developed several AI products including Wako.ai, NuPhone (AI receptionist), and VoiceOS. In particular, VoiceOS is a speech-to-text software that helps writers streamline and refine their language content, reducing redundancy in communication and enhancing work efficiency. VoiceOS allows AI to help understand the meaning of language rather than just stating messages. For example, if someone says, 'Um, so like, can you send me that report, by today, I mean tomorrow?' the AI simplifies the unnecessary chatter and directly states: Can you send me that report by tomorrow? This software can be applied to platforms like X, Instagram, Words, Zoom, and others.

Despite the constant skepticism towards AI in the market, especially fears of replacing human jobs and causing oversupply, the actual application scenarios of AI have already demonstrated its enormous potential. NVIDIA, as a leading artificial intelligence company, provides GPUs, LLMs (large language models), and Jetson Orin kits, which have become the infrastructure for many startups and research institutions, driving a technological revolution in AI and other fields. For many countries, this is not only a technological innovation but also a brand new business opportunity.

Michael Burry's atypical shorting has sparked huge AI bubble theories.

Michael Burry bought the CDS ( credit default swap ) in 2006 to short RMBS ( subprime mortgage-backed securities ). CDS (credit default swap) is a type of insurance contract where he pays a premium to the CDS, and if the RMBS blows up (defaults, crashes), he receives a huge payout, equivalent to betting that the bonds will blow up without actually having to hold the bonds, as mentioned in the movie “The Big Short”.

Michael Burry's operations on NVIDIA and Palantir involve Put Options, which increase in value if the target stock price drops, allowing Burry to profit. Michael Burry is not shorting NVIDIA and Palantir through traditional methods such as borrowing stocks or short selling (Short Selling); he simply profits from the decline in stock prices, leveraging a large nominal short position with minimal costs, without needing to actually borrow stocks or pay borrowing fees. Understanding Michael Burry's short philosophy can help grasp his atypical shorting tactics, which may be overly interpreted by AI skeptics or pessimists regarding his new game. Michael Burry merely believes that NVIDIA and Palantir are overvalued and sees an opportunity to make money when they decline.

AI technology is constantly evolving, and time will prove everything. Entrepreneurs who dare to innovate and take challenges may seize the opportunities in this technological revolution and enjoy the dividends of the future blue ocean market.

Is the AI sell-off a bubble or an opportunity? YC entrepreneurs are using AI to create new markets and a wave of startups. Originally appeared in Chain News ABMedia.