Before we move forward, let’s take a step back. From 1848 to 1850, San Francisco’s population surged from roughly a thousand people to over 25,000 amid the California Gold Rush. Now, a gold rush of a different sort is seeing billions poured into artificial intelligence, even as investments dry up in other parts of the tech sector. In some cases, even AI startups working on the basics of their business concepts are still attracting massive investments.
When two AI tech stars from Google, Ashish Vaswani and Niki Parmar, decided to strike out on their own, they quickly raised millions in capital for their startup, Essential AI. They didn’t have a business plan in place, or even a company name, but the potential for artificial intelligence is so hot that investors are willing to roll the dice.
The biggest focus right now is on generative AI, which means using artificial intelligence to create content, images, and the like. In 2018, a relatively paltry $400 million was invested in such AI solutions. It’s estimated that $4.5 billion was invested in 2022, but this year analysts expect far more money to pour in. Already, Microsoft has invested at least $10 billion in OpenAI, the organization behind the popular AI solution ChatGPT.
The influx of cash into AI comes even as investing in startups overall cools off, according to The Wall Street Journal. In the first quarter of 2023, venture capital investments weighed in at only $37 billion, down more than 60 percent from its peak in the 4th quarter of 2021. Of course, despite the way those numbers appear to be skewed, the reality is that investors put money into companies and sectors that they expect to have a long term impact, so while they might not be investing in one area, the money going to AI represents money that would be invested somewhere.
Industry experts believe that artificial intelligence could have a profound impact on everything from customer service to Hollywood movie production. Yet so far, how AI will be used largely remains up in the air. Regardless, the transformative potential is encouraging investors to throw money at promising teams, even if they lack concrete ideas and business strategies.