The rapid growth of artificial intelligence, particularly in the realm of generative AI, has sparked a heated debate about whether we are witnessing a genuine revolution or a speculative bubble. The staggering $6.6 billion funding round for OpenAI, the creators of ChatGPT, has fueled this discussion, raising questions about the true potential and commercialization of these technologies. This blog post explores the nuances of this debate, drawing insights from industry experts and analyzing the implications for the future of AI. Artificial Intelligence, Generative AI
The AI Hype Cycle
Euphoria around generative AI has triggered questions from some industry watchers about whether or not we are in an AI bubble. Rob Enderle, an independent tech analyst with the Enderle Group agrees this is a transitionary phase and that “vendors running around saying you have to deploy it as the latest digital transformation move is actually a form of attempted extortion”). But he warns that this “ugly phase” is set to continue for at least the next two-to-three years before things start to normalise.
The fears of an AI bubble are largely predicated on the belief that buyers do not necessarily comprehend the underlying technology and/or that a market to facilitate its continued growth has not really formed. Investors are stoking generative AI companies for the same misunderstanding, according to Enderle: that we are on the cusp of general artificial intelligence (GAI) — the “holy grail” of AI still decades away at least.
Big Tech’s AI Investments
Although very structured, these developments are being driven by tech behemoths such as Amazon, Google, Meta and Microsoft. Both are forging partnerships and ratcheting out products to speed up the usage of these technologies. On the other hand, the tech giants are shelling out large amounts of money to introduce features that are sometimes half-baked — essentially losing them more money than they make in revenue from users today.
For example, “Big tech is willing to throw serious money into a company that’s posting massive operation losses,” said Grace Harmon, an analyst at Emarketer of the large investments into OpenAI. These companies are also investing heavily in the area, simply because “they’re nervous about not spending enough on AI and getting left behind,” despite that such investment is by no means certain to pay off.
The Future of Generative AI
Generative AI is a booming technology and obviously exciting, but it is also growing at such an exceptional rate. Credit Suisse securities, while Dan Ives from Wedbush Securities claimed this was an “iPhone moment,” where the “AI Revolution is not just at our doorstep but transforming tech as we know it.
Yet many generative AI companies are still searching for how to achieve similar profitability. OpenAI is also on pace to lose $5 billion this year based upon revenues of $3.7 million, according to these reports, in which the company reportedly told investors that it can reverse course and post revenue in the billions as soon as next year, hitting closer to $100 billion by 2029.
Creative Strategies Analyst Carolina Milanesi says the generative AI business model is struggling because data center and computing power costs are much higher than the revenue being generated. Isabelle says the technology is still maturing, and that it’s “a Darwin situation where the survival of the fittest is happening.” But the real value of these technologies may be more apparent as users move past novelty use cases like “writing a poem” and over time begin to rely on generative AI in their day-to-day lives.
