Fear of missing out has sent the value of AI companies soaring despite little indication of when the technology will turn a profit, raising talk of artificial intelligence over-excitement.
The mystery deepens when it comes to predicting which AI companies will prevail, according to analysts interviewed by AFP.
ChatGPT maker OpenAI has secured $6.6 billion in a funding round that took its valuation to an impressive $157 billion, sparking fresh concerns that an AI bubble is about to burst.
“We’re in the bubble where all the vendors are running around saying you have to deploy this as the latest digital transformation move,” said independent technology analyst Rob Enderle of the Enderle Group about genetic AI.
“I expect this ugly phase for the next two to three years, but then things have to settle.”
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To critics, buyers don’t really understand the technology and the market needed to thrive is not yet mature.
Enderle also argued that investors are pouring money into AI companies under the misconception that we are close to the technology that has computers thinking like humans, called general artificial intelligence.
That “holy grail” won’t appear until 2030 at the earliest, he said.
The “Revolution” is here
Industry titans Amazon, Google, Meta and Microsoft have thrown their weight behind the technology, forming partnerships and pushing products to accelerate adoption.
But tech giants spend a lot to provide sometimes flawed features that currently cost them more than they get from users.
The massive investment in OpenAI shows that Big Tech is willing to sink “significant cash into a company facing significant operating losses,” Emarketer analyst Grace Harmon said of the OpenAI funding round.
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There is a “lingering fear of underinvesting in AI and missing out… even if the investments aren’t guaranteed to pay off,” he said.
Dan Ives, an analyst at Wedbush Securities, is one of Wall Street’s biggest believers in the importance of genetic artificial intelligence and compared the emergence of ChatGPT to an “iPhone moment” that will spend a trillion dollars over the next three years.
“The AI revolution is not just on our doorstep, it’s actively shaping the future of the tech world,” he said after OpenAI’s historic fundraising.
Wall Street is currently firmly backing Ives and has sent the share price of AI-chasing tech giants to record highs since ChatGPT burst onto the scene in late 2022.
Nvidia, the artificial intelligence tech, briefly became the world’s biggest company by market valuation in June amid a frenzy.
However, according to media reports, OpenAI will lose $5 billion this year on sales of $3.7 billion.
Historic funding round values OpenAI at $157 billion
The company told investors that the pain would be short-lived and that revenue would grow exponentially, reaching $100 billion in 2029.
More than poems?
The question is whether people will pay for productive AI services like Microsoft’s CoPilot that depend on OpenAI technology, said Creative Strategies analyst Carolina Milanesi, who argued against the idea of an AI bubble.
“Consumers will start to go beyond write the poem for me,” Milanesi said.
“It will become a part of our lives and we will depend on it, because we will be forced to.”
But for now, the AI manufacturing business model is tough, with data center and computing power dwarfing revenue, analysts say.
However, Milanesi doesn’t think the tech industry is getting carried away by genetic AI.
“How this shakes out is the way to think about it, not so much that the bubble bursts and everybody loses,” Milanesi said.
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“It’s a bit of a Darwinian situation where survival of the fittest happens,” he said.
And while there is more excitement about genetic AI than actual proof of its success, the technology is moving extremely fast.
“Investors are not sure what the destination is, but everyone is jumping on board and they don’t want to be left behind,” Enderle said.
“That usually ends badly,” he said.
Source: AFP