Welcome to a special edition of Decoder. This is Alex Heath, deputy editor of The edge. I’m guest hosting a few episodes this month as we head into the holidays, and I’m very excited about what we have coming.
I’ll be back later this month with an exclusive interview with the CEO of chipmaker Arm, so stay tuned. And if you want a preview, feel free to take a look Command linemy weekly newsletter about inside conversations in the tech industry.
But today we’re talking about a topic that I’ve been focusing on a lot lately. It’s arguably at the heart of the most ambitious and expensive bet the tech industry has ever made. This is, of course, artificial intelligence and, more specifically, the idea that one day soon, large companies across all types of industries will be spending hundreds of billions of dollars on AI products.
Today, however, that just doesn’t happen. AI companies have invested tens of billions this year alone. OpenAI raised a whopping $6.6 billion in October, surpassing xAI’s $6 billion fundraising round five months earlier. Anthropic just raised an additional $4 billion from Amazon; the list goes on and on. We’ve heard endless hype from CEOs here on Decoder about what this technology is supposed to do and why this investment is justified.
But so far, actual spending on AI products doesn’t come close to matching the level of investment made in the models themselves. According to a recent report from venture capital firm Menlo VenturesAI spending is growing rapidly, but has only reached $13.8 billion in 2024, barely covering the two biggest AI fundraising rounds of the year from OpenAI and xAI.
So how is this money actually spent on AI? What do companies actually buy and what do they do with it? And why do investors think the return on investment will ever be worth it?
To find out, I met with two AI investors: Tim Tully, partner at Menlo Ventures who co-wrote this report on corporate AI spending, and Nathan Benaich, author of “State of AI Report» and founder of Air Street Capital.
We dove into the data, the big trends they’re seeing with AI in the enterprise, and where we think it’s all going next – including when these AI companies will start generating the kind of profits that they will need to justify their decision. the money they are already spending.
If you want to learn more about the AI industry and dig deeper into the data behind some of the reports we talked about in this episode, check out the links below:
- 2024: The state of generative AI in the enterprise | Menlo Ventures
- State of AI Report | Nathan Benaïch
- AI Index Report 2024 | Stanford HAI
- How companies are currently spending on AI | Technological brew
- OpenAI is growing quickly and burning tons of money | New York Times
- Amazon to invest another $4 billion in OpenAI rival Anthropic | The edge
- Agents are the future AI companies promised – and they desperately need them | The edge
- Anthropic’s latest AI update can use a computer alone | The edge
- OpenAI reportedly plans to launch AI agent early next year | The edge
- Is AI hitting a wall? | Command line
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A podcast from The Verge about big ideas and other issues.