The AI Bubble: Are Startups and Investors Overreaching for Quick Profits?
In Poland, the long-awaited May weekend is upon us. A lot of people are probably travelling or already barbecuing and celebrating with family and friends.
So today's post is a little less technical and a little more business related. Last night I read a very interesting article about the state of the AI industry and I must admit I was quite surprised (link below). In a nutshell, you could say: high cost, low revenue.
It seems that many AI start-ups have overstretched themselves with their goals and plans. Of course, if you want to compete with Google, Microsoft, Meta and Amazon, it has to cost a lot of money. Are we facing an AI bubble? Have both startups and investors misjudged the situation and bet on quick profits? These are the questions that will be answered in the coming months.
According to the article, investors have invested around USD 330 billion in 26,000 start-ups! It remains to be seen which of them will be able to establish themselves on the market in the long term.
Basically, even the well-known tech giants are surprised or even shocked by the cost of building AI. This is probably not what they had in mind. Microsoft seems to be in a slightly better position with its involvement in OpenAI and Copilot. Other companies also see Microsoft's success as an opportunity to cash in on the AI gold rush.
To make the situation a little clearer, here is an example from the article: Anthropic spends about USD 2 billion a year, while earning about USD 150-200 million. I would like to say that I think the LLM Claude Opus is really excellent. I wrote this a few weeks ago in relation to my financial assistant.
This turbulent situation is currently causing some start-ups to simply disappear. Others are looking for "protection" from the giants.
This, of course, raises the question of whether we are heading back to a market dominated by tech giants. If the startups are unable to grow their revenues in the foreseeable future, there will be a pull effect.
This means that everything that could potentially be interesting in the medium to long term will be integrated by the “AI-4”, and the rest will be left to fend for themselves.
In order to carry out large AI projects and developments, you need to invest billions, not millions. This in itself will have a major impact on the market.
The next few months will show which direction the journey will take! As always, it's very exciting!
Enjoy the sunny days! See you next week - when we get again a little closer to processes and AI agents 🙂!
LINK to the article:
https://www.nytimes.com/2024/04/29/technology/ai-startups-financial-reality.html