Thoma Bravo co-founder Orlando Bravo said that valuations for artificial intelligence companies are “at a bubble,” comparing it to the dotcom era.

But one key difference in the market now, he said, is that large companies with “healthy balance sheets” are financing AI businesses.

Bravo’s private equity firm boasts more than $181 billion in assets under management as of June, and focuses on buying and selling enterprise tech companies, with a significant chunk of its portfolio invested in cybersecurity.

Bravo told CNBC’s “Squawk on the Street” on Tuesday that investors can’t value a $50 million annual recurring revenue company at $10 billion.

“That company is going to have to produce a billion Dollars in free cash flow to double an investor’s money, ultimately,” he said. “Even if the product is right, even if the market’s right, that’s a tall order, managerially.”

The influential tech investor also emphasized that there’s a “big difference” between the dotcom collapse and the current landscape of AI.

“Now you have some really big companies and some big balance sheets and healthy balance sheets financing this activity, which is different than what happened roughly 25 years ago,” he said.

Bravo said his firm is looking for opportunities in software and sees AI as a boost to the industry.

“With AI, you have so much more to sell them, agentic solutions, an easier way for the customer to engage with your product,” he said. “That is a big, big, new, exciting tailwind for the industry.”