For thirty-five years, Fortune has been tracking the world’s largest companies in our Global 500 ranking. It’s a strong barometer of global business, and last year a couple of trends collided to shake it up: Energy prices cooled, knocking down revenue for companies such as Saudi Aramco and Exxon Mobil; and AI got red-hot, fueling a boom for tech giants like Nvidia and Microsoft.

Which companies being built today will grow to be the world’s biggest? It’s the job of a venture capitalist to figure that out.

No VC firm has picked winners better than Sequoia Capital. In 1978 it gave Steve Jobs $150,000 to create Apple—now worth $3.6 trillion. Sequoia was also first to back Nvidia in 1993. It cut early checks for Google, Cisco, YouTube, and Airbnb.

Over the course of the firm’s lifetime, Sequoia has returned more than $70 billion to its investors, with more than half of that—some $43 billion—paying out in just the past five years. In fact, more than 25% of the market cap of the Nasdaq comes from companies underwritten by Sequoia.

Unsurprisingly, AI is an asset that Sequoia thinks a lot of future giants will deploy. It views AI as a foundational technology, on par with the invention of electricity. More than 60% of the firm’s investments last year went to AI-focused companies.

But even Sequoia acknowledges that the gap between what we’re spending on AI and the business it’s generating is the $600 billion elephant in the room: For all the promise of the technology, where’s the revenue?

Other than OpenAI (another Sequoia-backed company), which is reportedly generating income at a $3.4 billion annual rate, few startups have proved they can capture cash as well as they can burn it. The result could be a nasty AI hangover that hits both private and public markets.

“In the case of many new technologies, speculative investment frenzies often lead to high rates of capital incineration,” Sequoia recently wrote in a blog post. “It’s hard to pick winners, but much easier to pick losers.”

We recently sat down with the head of Sequoia Capital, Roelof Botha, at our Brainstorm Tech conference in Park City, Utah, and at greater length for this issue’s cover story. As he told Fortune’s Michal Lev-Ram: “Winning isn’t everything, it’s the only thing.” To learn how he’s guiding the firm to sort winners from losers amid the noise and hype, see the cover story here.

One Sequoia company that’s still charting its path—and betting on AI to catapult it further—is Robinhood. The company began as a mobile-first day-trading app for millennials, and it helped spark a meme-stock frenzy. But Vlad Tenev has ambitions to build a serious financial firm that can rival behemoths like Fidelity and Charles Schwab. Jeff John Roberts sat down with Tenev to learn more about how he’s transforming the company and how he has transformed himself as a leader. Becoming a financial giant may seem unlikely for the upstart app, but as one fintech investor tells Roberts, “Sometimes the pirates become the navy.”

Alyson Shontell
Editor-in-Chief, Fortune
@ajs

This article appears in the August/September 2024 issue of Fortune with the headline, “The AI hangover.”

Are we headed for a massive AI hangover? It’s a $600 billion question that needs to be addressed