AI bubble or 'revolution'? OpenAI's big payday fuels debate
Fear of missing out has skyrocketed the value of artificial intelligence companies, despite the lack of clear signs indicating when the technology will become profitable, leading to discussions about AI overenthusiasm. The uncertainty deepens when attempting to forecast which generative AI firms will emerge victorious, as per analysts interviewed by AFP.
The Rise of OpenAI
Notable ChatGPT-maker OpenAI recently secured $6.6 billion in funding, driving its valuation to a staggering $157 billion. This development has sparked concerns that an AI bubble may be on the verge of bursting. Independent tech analyst Rob Enderle of Enderle Group remarked on the current state of generative AI, stating, "We are in a bubble where all vendors are pushing for deployment as the latest digital transformation move."
Enderle anticipates a turbulent phase for the next two to three years before the industry stabilizes. Critics argue that buyers lack a comprehensive understanding of the technology, and the market necessary for its success is not yet fully developed.
The Quest for General Artificial Intelligence
Enderle also highlights that investors are injecting funds into generative AI companies with the misconception that we are at the cusp of achieving general artificial intelligence, where computers think akin to humans. He opines that this "holy grail" is unlikely to materialize before 2030.
Major industry players such as Amazon, Google, Meta, and Microsoft have thrown their support behind AI technology, forging partnerships and launching products to drive adoption. Despite their efforts, these tech giants are investing heavily in offering features that are sometimes flawed and currently incur more costs than they generate from users.
Investment in OpenAI
The substantial investments in OpenAI underscore Big Tech's willingness to allocate significant resources to a company grappling with substantial operational losses. Emarketer analyst Grace Harmon notes a persistent fear of underinvestment in AI and the potential for missed opportunities.
Dan Ives of Wedbush Securities, a staunch advocate for generative AI, draws parallels between ChatGPT's emergence and an "iPhone moment," predicting trillions of dollars in spending over the next few years. He believes that an "AI Revolution" is not merely imminent but actively shaping the tech landscape's future.
Market Response and Future Projections
While Wall Street aligns with Ives, propelling the stock prices of AI-focused tech giants to record highs since ChatGPT's arrival in late 2022, media reports suggest that OpenAI is set to incur a $5 billion loss this year despite generating $3.7 billion in sales. The company assures investors that this setback will be brief, projecting exponential revenue growth reaching $100 billion by 2029.
Analysts raise concerns about the viability of the generative AI business model, citing substantial costs in data center and computing power that surpass revenue. Creative Strategies analyst Carolina Milanesi emphasizes the increasing integration of generative AI into daily life, driven by consumer reliance and necessity.
The Future of Generative AI
Milanesi acknowledges the challenges posed by the generative AI business model but remains optimistic about its prospects. She rejects the notion of an AI bubble, emphasizing the ongoing evolution and adaptation within the industry. While excitement around generative AI surpasses tangible evidence of success, the rapid pace of technological advancements persists.
Enderle cautions about the uncertainties surrounding investors' objectives, highlighting a collective rush to embrace generative AI without a clear destination in mind. He warns of potential pitfalls that often accompany such fervor.
