After years of easy money, the AI industry faces a calculation.
A new report by Stanford’s Institute for Human centered on artificial intelligence (HAI), which studies AI trends, revealed that Global Investment in AI fell for the second consecutive year in 2023.
The two private investments – that is to say investments in VCS – and business investment startups – mergers and acquisitions – in AI industry were down in 2023 compared to the ‘previous year, according to the report, which quotes Data from the quid.
IA mergers and acquisitions increased from $ 117.16 billion in 2022 to 80.61 billion dollars in 2023, down 31.2%; Private investment increased from $ 103.4 billion to $ 95.99 billion. Taking into account the minority participation agreements and public offers, Total investment in AI fell to 189.2 billion dollars last year, a drop of 20% compared to 2022.
However, some IA companies continue to attract substantial slices, such as recent investments of several billion dollars of anthropic from the acquisition of Amazon and $ 650 million in Amazoft of the talent of inflection inflection AI inflection (if not society itself). And more IA companies receive investments than ever, with 1,812 AI startups announcing funding in 2023, up 40.6% against 2022, according to Stanford Hai’s report.
So what’s going on?
Gartner analyst, John -David Lovelock, said that he sees AI investing “spreading” like the greatest players – Anthropic, Openai and so on – accumulate their land.
“The number of $ 1 billion investments has slowed down and is almost finished,” Lovelock told Techcrunch. “The major AI models require massive investments. The market is now more influenced by technological companies that will use existing AI products, services and offers to create new offers. »»
Umesh Padval, Managing Director of Thomvest Ventures, attributes the overall investment in AI reduction to slower than expected growth. The initial wave of enthusiasm has given way to reality, he says: that AI is in conflict of challenges – some techniques, some of the market – which will take years to solve and fully overcome.
“The deceleration of investment in AI reflects the recognition that we are still sailing in the first phases of the evolution of AI and its practical implementation between industries,” said Padval. “Although the long -term market potential remains immense, the initial exuberance has been tempered by the complexities and challenges of the scaling of AI technologies in real world applications … This suggests a landscape of ‘more mature and more demanding investment. ”
Other factors could be in progress.
Graylock’s partner, Seth Rosenberg, argues that there is simply less appetite to finance “a bunch of new players” in AI space.
“We have seen a lot of investment in Foundation models At the start of this cycle, which are very important in capital, “he said. “The capital required for AI applications and agents is lower than other parts of the battery, which may be the reason why absolute dollar financing is decreasing.”
Aaron Fleishman, partner of Thola Capital, said that investors could realize that they were too dependent on “projected exponential growth” to justify the assessments of the sky of AI startups. To give an example, the stability of the company AI, which was estimated at more than a billion dollars at the end of 2022, would have reported only $ 11 million in revenues in 2023 while spending $ 153 million in operating expenses.
“Business performance trajectories and AI stability could refer to the challenges that are looming,” said Fleishman. “There was a more deliberate approach to investors in the assessment of AI investments compared to a year ago. The rapid increase and the fall of certain startups of marquee in AI in the past year have illustrated the need for investors to refine and sharpen their point of view and their understanding of the value and value chain The defense of AI within the battery. »»
“Deliberate” seems to be the name of the game now, indeed.
According to a compiled pitchbook report for Techcrunch, VCS has invested $ 25.87 billion worldwide in AI startups in the first quarter of 2024, against $ 21.69 billion in the first quarter of 2023. But investments in T1 2024 have known Only 1,545 transactions compared to 1.909 at first sorting during this time, he slowed down from 195 to T1 2023 to 176 at T1 2024.
Despite the general discomfort in the circles of AI investors, the generative AI – the AI which creates new content, such as text, images, music and videos – remains a light point.
FUnding for AI generating startups reached $ 25.2 billion in 2023, according to the Stanford Hai report, almost nine years investment in 2022 and approximately 30 times the amount of 2019. And The generative AI represented more than a quarter of all the investments linked to the AI in 2023.
Samir Kumar, co-founder of Tours Capital, does not think that Boom Times will last however. “We will soon evaluate if the generator provides the efficiency gains promised on a large scale and leads to high -level growth through AI products and services,” Kumar said. “If these planned steps are not respected and we remain mainly in an experimental phase, revenues of” experimental execution rate “may not go to sustainable annual recurring income.”
In Kumar’s Point, several high -level VCs, including Meritech Capital – whose bets include Facebook and Salesforce – TCV, General Atlantic and Blackstone, have cut generative so far. And the greatest customers, companies, companies, seem more and more skeptical about the promises of technology and if it can hold them on them.
In a pair of recent surveys of the Boston Consulting Group, about half of the respondents – all the leaders of C -Suite – said that they do not expect the generator to cause substantial productivity gains and Let them worry about the error potential and compromise on data resulting from the generative tools fueled by AI.
But if skepticism and the financial decrease trends that can result are a bad thing depends on your point of view.
For the part of Padval, he sees the AI industry undergoing a “necessary” correction to “the bubble -shaped investment fervor”. And, in his belief, there is light at the end of the tunnel.
“We pass at a more sustainable and standardized rate in 2024,” he said. “We plan that this stable investment pace to persist throughout the rest of this year … Although there may be periodic investment adjustments, the overall trajectory of investment in AI remains robust and ready for sustained growth. “
We will see.