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Wednesday, June 28, 2023
This is the year of AI
The first half of 2023 has been a wild ride for the tech industry — from Microsoft’s (MSFT) battle to acquire Activision Blizzard (ATVI) to Meta (META) CEO Mark Zuckerberg and Tesla (TSLA) CEO Elon Musk looking to throw hands in the Octagon. But the biggest story of the year so far is the explosion in interest around generative artificial intelligence.
Companies from across the business spectrum have jumped on the bandwagon, debuting generative AI-powered chatbots that can help plan your vacation, AI assistants that organize enterprise data, and AI services that can create images and videos.
Shares of AI-related firms have skyrocketed on the bonanza. Nvidia (NVDA), which designs the chips and software used to power AI systems, is among the biggest winners, with shares jumping 176% year to date. Enterprise AI company C3.ai (AI) is also basking in the glow of investor interest, with shares up 190% year to date.
Big tech isn’t the only game in town when it comes to AI, though. According to Traci Gusher, EY’s Americas data and analytics leader, AI startups are drawing plenty of interest from venture capitalists, despite a slowdown in overall VC spending.
“What we've seen is that just in this year alone, VC funding is up nearly 7x in this space, and that's against a market where venture capital is actually down 34% in the same time period,” Gusher explained. “The amount of money being just pumped into this is just unprecedented.”
But the AI boom isn’t without its detractors, including some experts in the field who say the technology is too unpredictable and could have dire consequences for everything from jobs to human existence. The frenzy around AI has gotten so loud that President Biden and members of Congress are discussing potential ways to regulate the technology.
How did we get here? Let’s take a look back at the year in AI so far.
OpenAI, Microsoft, and Google kick off an AI race
The AI movement kicked off in earnest in Nov. 2022 when OpenAI debuted its ChatGPT generative AI-powered chatbot. In just two months, according to UBS, the app hit 100 million monthly active users, outpacing the likes of TikTok, Instagram, and Uber to the milestone.
Microsoft, which invested billions in OpenAI, struck next, unveiling a new version of its Bing search engine and Edge browser powered by OpenAI’s technology. Microsoft’s goal is to siphon off users from Google’s search engine and Chrome web browser. According to the Windows maker, 1% of market share in the search segment is worth about $2 billion in revenue.
Microsoft didn’t stop there, either. The company has added generative AI technologies to a slew of different products including its security offerings, productivity suit, and data analytics software. The tech giant has also debuted its Azure AI Studio, which allows customers to build custom AI copilot apps. Shares of Microsoft are up 37% year to date.
In an attempt to cut off Microsoft, Google debuted its Bard AI chatbot the day before Microsoft rolled out its Bing software. In May, Google announced a series of software updates including an experimental form of Google search called Search Generative Experience (SGE) that functions similarly to Microsoft’s Bing search engine.
Google has also debuted generative AI capabilities for its Workspace productivity suit. The feature is currently available to trusted users. Shares of Google are up 34% year to date.
Meta, Amazon, and a host of other tech companies have jumped in to announce their generative AI ambitions. Chip firms Nvidia and AMD (AMD) have also benefited handsomely from the AI bump, even as traditional PC chip sales have collapsed compared to their pandemic highs.
Nvidia might be garnering plenty of attention thanks to its dominance of the AI chip space, but shares of AMD also jumped in the first half of the year, rising 69%.
Fear of an AI nightmare
Not all of the news surrounding generative AI has been positive. In March, a host of major names in the AI space including Tesla CEO Elon Musk signed an open letter by the Future of Life Institute calling for a 6-month moratorium on the training of AI systems more powerful than GPT-4.
In May, OpenAI CEO Sam Altman, Microsoft CTO Kevin Scott, and Google DeepMind CEO Demis Hassabis signed a separate open letter by the Center for AI Safety stating that mitigating the risk of extinction from AI should be a global priority alongside other catastrophes such as pandemics and nuclear war.
Altman also appeared before Congress to discuss the need to regulate AI to prevent potential societal harms. President Biden, meanwhile, has met with tech CEOs and AI critics to discuss the need to responsibly develop the technology.
While fears that AI poses an existential threat capture headlines, AI also poses more immediate danger due to its ability to spread disinformation and misinformation. In May, an AI-generated image showing an explosion near the Pentagon briefly sent stocks tumbling before the Pentagon confirmed the photo was a fake.
AI dominates the rest of the year
So will AI continue to be the talk of Wall Street and Silicon Valley in the second half of the year? Experts say it’s more than likely. That’s because, unlike other technologies, AI is something with practical applications that can improve efficiencies in businesses and, more generally, people’s lives.
“I think that it is absolutely going to dominate the conversation for the remainder of the year and in years to come,” Gusher said.
“Organizations need to be thinking about this with a frame of mind of ‘Generative AI is ready for my business, but is my business ready for generative AI?’ ”
And those businesses that understand how to best implement AI will have a distinct advantage, explained Erick Brethenoux, Gartner distinguished VP analyst.
“The companies that I see that have taken most advantage of AI techniques are companies that are adopting what we call an AI-first mentality. They're not going to use AI for every project they do, but they asked the question, ‘Can AI help here? ”