This year has seen three fledgling AI firms swallowed up by Big Tech companies.
As the Financial Times (FT) notes in a report Wednesday (Aug. 14), it is a pattern that threatens to leave venture capitalists (VCs) on the outside looking in at the artificial intelligence (AI) boom.
AI companies Adept, Character.AI and Inflection had, combined, raised upwards of $2 billion before their top executives and many of their workers were hired away by Amazon, Google and Microsoft, respectively.
The FT report points out that the tech giants gained these startups expertise and talent, along with the licenses to their products, while VC firms are essentially back where they started.
It’s a situation, the report argues, that suggests trouble ahead for other startups trying to develop their own AI large language models. These deals also fuel a worry in the VC world that it can’t compete with massive tech companies, which can much more easily afford to invest in multibillion-dollar AI systems, the FT adds.
A separate report last week by The Wall Street Journal (WSJ) also explored this trend, with investors telling that newspaper that other, similar deals are in play as the generative AI bubble seems ready to peak, and startups are discovering they don’t have the funds to develop AI large language models.
“There were a lot of companies that raised on a big vision, but not tangible examples and actual detail,” Shaun Johnson, a founding partner at AIX Ventures, told the WSJ.
Meanwhile, recent research by PYMNTS Intelligence finds that — in spite of big budgets and bold ambitions — most large companies are struggling to employ AI in meaningful ways.
The findings in “The Impact of GenAI on a COO’s Priorities,” the third edition of PYMNTS Intelligence’s “2024 CAIO Project,” present a sobering reality check for the AI revolution. Based on surveys of chief operating officers from companies with at least $1 billion in yearly revenue, the report shows a significant gap between the perceived potential of generative AI and the way it is actually being applied in the corporate world.
“Seventy percent of COOs from firms surveyed — all with at least $1 billion in revenue — agree that GenAI is a critical part of strategic planning,” the report stated. “Nonetheless, there is a gulf between aspiration and reality.”
For example, instead of using AI for high-level decision-making or innovative product development, many companies deploy the technology for more routine tasks, with 58% of COOs saying their businesses use GenAI for accessing information, while half of the executives say it powers their customer service chatbots.
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