Tech Giants Trigger Generative AI Investment Boom
From virtual reality to Web3, the digital revolution has seen more than its share of next-big-thing hype cycles. Each generated an investment boom, only to see it fizzle later as the technology proved harder to build and the results proved less compelling than promised.
Those newfound generative powers have, in just a few years, greatly expanded the commercial potential for AI technology in the eyes of technology companies and investors, sending money and resources pouring into the sector.
Major technology companies, including Microsoft, Google, Amazon and Meta Platforms, have begun placing massive bets on gen AI. In early 2023, for instance, Microsoft invested $10 billion in OpenAI, a leading developer of the new generation of AI models, and began incorporating its technology into Microsoft products. Also in early 2023, Google invested $300 million in gen AI developer Anthropic and significantly ramped up its own internal development of the technology.
Facebook parent Meta, which changed its name in 2021 to reflect a major shift to developing metaverse applications, quietly pivoted away from that initiative in 2023 to turn its attention to generative AI, releasing its own tool called LLaMA. In a post on Facebook in late February 2023, Mark Zuckerberg announced, “We’re creating a new top-level product group at Meta focused on generative AI to turbocharge our work in this area.”
Amazon Web Services has partnered with StabilityAI, a consortium of AI research institutions and a leading developer of AI-powered image generators. And more recently in April, Amazon announced Bedrock, which is a new service that allows developers to build generative AI applications on AWS.
Venture capital and private equity investors, who had long eschewed the sector, have also changed their view of the technology’s commercial prospects of late and begun to put money into generative AI.
In 2022 alone, 3,198 AI startups received $52.1 billion in funding in 3,396 separate deals, according to the GlobalData Financial Deals Database. 110 deals involved startups specifically working on generative AI applications, raising $2.6 billion, according to CB Insights. That was an increase over the $1.5 billion raised in 105 deals in 2021.
As of the end of 2022, Dealroom.co calculated the collective value of gen AI startups at $21 billion, roughly half of which fell into the unicorn category of being worth $1 billion-plus. In January 2023, however, the Microsoft-backed OpenAI was reported to be in talks with investors about a tender offer of $300 million in shares that would value that company alone at $29 billion. As of March 2023, VC firm NFX tallied 539 generative AI startups, excluding OpenAI and StabilityAI.
The money and resources now being directed toward generative AI, and the technology’s rapidly expanding capabilities, are quickly raising the stakes for the industries most directly affected.
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