AI is being touted high and low as the latest platform shift in technology. The results have been fascinating, and the progress has happened with break-neck speed. Venture funding in AI has grown 20x over the last decade. Y Combinator’s latest batch of 242 companies had 71% building in AI. 17% of Russell 3000 companies mentioned AI in their earnings calls.
In a blog post, Jeff Burke from Replit breaks down the massive capital moves in AI:
- Microsoft and OpenAI plan $100B data center project
- Saudi Arabia plans $40B push into AI
- Microsoft invests $10B in OpenAI
- Amazon invests $4B into Anthropic
- Google invests $2B in Anthropic
- Microsoft acquires Inflection AI team for +$1B
- Databricks acquires MosaicML for $1.3B
- Mistral raises $400M in Series A
- Google, Amazon, and Nvidia put $235M into Hugging Face
As much potential as AI has, and as much as people are deploying significant amounts of capital into its development, its important to understand moments when the promise of some of these AI companies does not work out. We wrote last week about Microsoft effectively hollowing out Inflection AI’s talent. Similarly, this week, we saw Stability AI’s CEO step down as the ongoing list of the company’s woes were laid out.
Many people’s skepticism of the AI hype stems from the fact that we only recently went through an intense hype cycle for technology writ-large, a massive crypto wave, and are now seeing what feels like similarly unsustainable realities, such as Nvidia being valued at a higher market cap ($2.3 trillion) than Google ($1.8 trillion), despite Nvidia’s generating YTD revenue of $60 billion as of February 2024, which was equivalent to Google’s $69 billion of cash flow around the same period.
Does the hype mean the impact of the technology isn’t real? No. Does the failure of a few high profile AI companies invalidate the space? Definitely not. But what many investors, operators, and founders alike are anxious about is waiting for the other shoe to drop. When, if ever, does reality come back down to earth? Only time will tell.
