Artificial intelligence promises to be the ultimate helpmeet. Start-ups such as San Francisco-based Abacus.AI offer to use AI to help companies perform complex calculations such as predicting customer churn. Pilot AI is an early-stage company working on tech that it says will turn sales calls into detailed notes.
Generative AI companies that create new content from existing data are drawing hundreds of millions of dollars in funding despite a valuation crash across the rest of the tech sector. Funding rose a third last year, according to data from PitchBook, to just under $1.4bn.
This year will far surpass that total. Microsoft is considering a $10bn investment in OpenAI, creator of AI chatbot ChatGPT. Rival Cohere, which plans to target businesses, is in talks to raise funding at an estimated $6bn valuation. This week, Tome, an AI-powered storytelling start-up with more than a million users, raised $43mn and almost doubled its previous valuation. More funding is being lined up. Canadian venture capital firm Radical Ventures is raising a $550mn fund that will target AI start-ups.
Meanwhile, cloud computing companies such as Amazon’s AWS are locking up deals with OpenAI rivals, including Hugging Face.
Will it last? This time last year, the buzziest start-ups were promoting Web3, a new iteration of the internet in which users could control their data and use digital tokens to facilitate transactions. This has fallen out of favour amid a crash in cryptocurrency prices.
AI may have more longevity. Cutting business costs and parsing corporate data are more practical applications than financial speculation in non-fungible tokens.
PwC predicts that AI will contribute almost $16tn to the global economy by 2030, divided between increased productivity and consumer demand for enhanced products. But valuing AI start-ups, most of which are pre-revenue, is difficult. Nor is it yet clear how much companies will pay for AI tools and how regulators might impose restrictions.
Still, companies know that rushing to join the movement is already being rewarded in markets. This week, shares in Nvidia rose 14 per cent after it declared a new AI services model. Microsoft’s share price reached a near six-month high after unveiling its AI-powered search engine. Digital media company Buzzfeed’s share price almost quadrupled after it announced plans for AI quizzes. Public market gains should keep AI start-up valuations rising.