While the role of media in molding public perception and market response has long been of interest to researchers, there has been a dearth of exploration into how media representations of new ventures’ AI involvement influence market responses. This study examines the intricate interplay between media characteristics and market response to new ventures’ purported AI involvement. Through comprehensive financial market and media data analysis on all Chinese high-tech new ventures that have successfully applied for IPOs, we reveal what we term the “Hype Paradox,” an unexpected negative relationship between media sentiment regarding a new venture’s involvement with AI and its performance in the financial market, and the “Hype Watershed,” a term capturing the unforeseen curvilinear moderating effect of media affiliation based on the ratio of news from state-controlled media in the overall news coverage on sentiment-financial performance link. We further expose the “Watershed Diminisher,” where increased media coverage intensity blurs the “Hype Watershed” relationship, serving as the moderating effect on the curvilinear moderating impact of state-controlled media coverage. These insights shed light on the field’s ongoing discussions on the business impact of AI at the intersection of entrepreneurship, AI, media, and market behavior, specifically the AI hype’s multifaceted impact on business ventures’ outcomes.
