New Delhi: Have you ever asked yourself how come that an application on your phone that does not even cost you a dime is worth thousands of crores? This is called “valuation.” There is a great question that is being posed these days, and it is: Are tech valuations overhyped? This is to say, can these companies be all that and all, or is it a dream? In the last several years, investors were also quite thrilled about any app-based company or one that incorporated AI. They provided such companies with enormous sums of money, and this made the companies appear very successful.
However, at this point investors are becoming cautious. To be on the safe side is to be careful. They are checking the real bank accounts of these tech startups and found out that a good part of them are losing money every month. They are committing more money to the concept of marketing (or ads in a fancy word) as compared to how much they make out of selling their services. Due to this fact the prices of these companies are beginning to go down.
This is an important lesson to everyone. Simply because it is fancy and modern does not imply that it is a good business. A genuine business must offer something of use and make a profit. A lot of analysts believe that the valuation of most AI and tech firms will decline to a more realistic value in the coming few months. This may be frightening to the individuals who own such companies, but it is healthy to the economy since it makes things in their right mind.
