Generative AI’s Dominance: 2023's Momentum and the Evolving Landscape
Generative AI saw an unprecedented surge in attention throughout 2023, primarily due to OpenAI's ChatGPT, which rapidly became the fastest-growing tool/app in history, surpassing the growth rates of TikTok, Instagram, and other popular platforms. ChatGPT's launch on November 30th, 2022, swiftly amassed 1 million users within just 5 days, skyrocketed to 57 million users by December and reached a staggering 100 million users by January 2023. These milestones solidified its exceptional adoption rate. The prominence of Generative AI was further underlined later in the year when the Cambridge Dictionary named 'hallucinate' its word of the year, illustrating its societal impact.
In response to this burgeoning trend, other technology firms unveiled their own solutions. Google introduced Bard, its chatbot; Amazon launched Bedrock services, a suite of tools for building generative AI applications as part of AWS; Meta, Facebook's parent company, released Llama 2, an open-source large language model, marking a pivotal moment in the open-versus-closed-source models debate; and Elon Musk unveiled Grok, an AI chatbot that has access to user posts on X (formerly Twitter) offering ‘fun mode’ and ‘regular mode’.
The widespread enthusiasm for Generative AI pushed almost every company to accelerate its AI strategy. As often observed with any technological advancements—explained through the lens of the Dunning-Kruger effect (referencing my earlier post this year)—many individuals and organizations seem to have moved beyond the 'peak of inflated expectations,' or ‘I know everything’ to now navigating towards ‘enlightenment’ or ‘it’s starting to make sense’. While 2023 witnessed numerous pilots, Proof of Concepts (POCs), and experimental initiatives, the trend is likely to shift towards focused adoption in 2024. To a large part success will also depend on how quickly the tech industry finds ways to mitigate the ‘hallucination’ problem. The introduction of more powerful multi-modal models, blending text, image, audio, and video, will further extend creative possibilities, opening new avenues for innovation in 2024.
As emphasised in my recent article, it remains crucial for enterprises to strategically evaluate the reasons behind their pursuit of transformation and employ the appropriate blend of processes and technological interventions to address specific business outcomes. This approach is essential instead of succumbing to FOMO and using Generative AI as a universal fix. Importantly, companies with a stronger focus on data management will likely move faster, as poor data practices pose a significant risk in AI deployment. Concerns about data leaks through AI tools are a top priority for leaders, prompting firms to reorganize their data systems before fully capitalizing on Generative AI's benefits.
In the investment landscape, big tech firms have significantly outpaced VC groups in Generative AI startups this year. As per PitchBook data, a total of US$23.2 billion had been committed to generative AI startups in 2023 through October 15— which is 2.5x over 2022’s total. Notably, the tech giants have engaged in substantial deals involving commitments of cloud computing resources, serving as substitutes for cash over multiple years. These commitments differ notably from typical VC investments as they originate from corporate balance sheets rather than corporate venture arms.
Microsoft made headlines in January with a staggering US$10 billion investment in OpenAI, acquiring a 49% stake in the startup valued at USD $29 billion. Shortly after in February, Google announced its partnership with Anthropic, a leading language model provider, investing an estimated US$300 million for a c.10% stake. In March, Salesforce joined the investments league, backing both Anthropic and Cohere, another LLM provider. Later in September, Amazon and Anthropic announced a strategic collaboration involving a potential US$4 billion investment by Amazon, obtaining a minority stake in Anthropic. Under this partnership, Anthropic committed to selecting AWS as its primary cloud provider and to train and deploy its future foundation models on AWS Trainium and Inferentia chips. This significant investment announcement arrived within eight months of Anthropic’s commitment to Google Cloud, underscoring the urgency with which tech companies are willing to act to integrate Generative AI into their offerings.
Another significant development has been the passage of AI regulations across the developed world. The US administration signed an executive order instructing federal agencies to regulate AI usage, while the EU passed an AI Act in December, limiting the technology's use in high-risk areas. Expected to be formally adopted in 2024, this act will impose specific rules on AI providers and deployers concerning transparency, documentation, and testing. While I advocate for AI regulation, it shouldn't stifle innovation, leave companies lagging behind less regulated counterparts, or impede small companies' growth by imposing burdensome compliance. For a compelling perspective on how regulations might inadvertently stifle competition within the market, I highly recommend watching Bill Gurley's talk at the All-in Summit this year. After listening, you might walk away with a different perspective on why Sam Altman urged Congress to regulate the AI industry, arguing for global standards.
In conclusion, 2024 is poised to witness a rapid surge in the tech industry's efforts to tackle the 'hallucination' issue, marking a pivotal shift from experimentation to the focused adoption of GenAI. This year will distinguish between companies genuinely evolving or restructuring their business models using GenAI and those merely paying lip service to AI. Expect ongoing evolution and increased stringency in regulations, though global alignment remains a work in progress. Companies are set to prioritize data for enhanced AI benefits. Startups utilizing AI may require smaller teams for prototype and MVP development, possibly reducing early-stage VC funding sizes. Brace for unexpected developments— an exhilarating year lies ahead.
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