From 2020 to 2023, AI investment in the United States surged 10-fold and in Europe increased four-fold. In contrast, Israel’s AI investment in 2023 fell to 2018 levels. This startling decline highlights the urgency of addressing several key issues:
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Yaniv Golan, Co-founder of lool Ventures
(Photo: Mariana Stevaneva)
Global competition and rapid progress
Rapid advances by global AI giants, especially OpenAI, are a major factor. Israel, like many other countries, was caught off guard by the speed and scale of these developments. But our geographic and operational distance from major AI hubs like the US and China exacerbated the challenge. The rapid pace of AI innovation demands ongoing engagement and agility, which has been difficult to sustain given our current focus and resources.
Skills gap and talent shortage
Additionally, there is a critical skills gap we must address. AI development requires top-level expertise in computer science and data science. Israel boasts a strong tech talent pool, but we do not have enough experts at the forefront of AI research and development. Our educational institutions and training programs need to produce more experts to compete globally. The shortage of skilled AI experts is hindering our ability to develop cutting-edge AI technologies and solutions. Currently, Israel ranks #1 in the world for AI talent concentration, but there is a significant shortage of people with advanced degrees in AI-related fields.
Financial constraints and infrastructure
Additionally, the infrastructure required for AI development is another hurdle. Building advanced AI models requires cutting-edge hardware and vast computational resources that are expensive and often out of reach for many Israeli startups. Without sufficient investment in these areas, the ability to develop and train competitive AI models is severely limited.
One of the most significant impacts of advances in AI is its potential impact on the job market. As AI technology becomes more capable, it could dramatically reduce demand for many traditional occupations that generate a large portion of GDP. This shift brings both challenges and opportunities.
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Job replacement: AI and automation may replace certain jobs, especially those involving routine tasks. Demand may decrease in manufacturing, customer service, and even some areas of technology.
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Creation of new jobs: Conversely, AI will also create new job opportunities in areas such as AI research, development, and maintenance. Roles that require a combination of AI expertise and domain-specific knowledge will become increasingly important.
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Reskilling and upskilling: Investing in reskilling and upskilling workers is essential to mitigate unemployment. Educational institutions, working with governments and the private sector, should develop programs to equip workers with the skills needed for an AI-driven economy.
Rethinking education for the younger generation: We need to fundamentally rethink how we educate the younger generation. Education systems need to evolve to incorporate AI literacy, coding, and data science as core components from an early age. There needs to be a focus on critical thinking, problem-solving, and adaptability – skills that are invaluable in an AI-dominated future.
Strategic Initiatives to Reverse the Trend
To reverse this trend and ensure Israel remains a leader in AI, several strategic initiatives are essential.
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Make AI a national priority: AI needs to be elevated to a national priority. Governments must recognize the strategic importance of AI and allocate resources accordingly, including funding for research, development, and infrastructure. Policies that encourage innovation and investment in AI are essential for our growth.
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Attracting and Retaining Talent: To be a leader in AI, we need to attract and retain the best AI talent. Companies outside of Israel, as well as countries that recognize the opportunity, are poaching our talent. The offers they receive are very generous, considering Israel has offered very little in terms of quality of life or prospects for a better future recently. We need to create programs that offer competitive salaries, research opportunities, and a supportive ecosystem for AI professionals. This will help us retain our talent, attract more experts to Israel, and ensure we have the expertise we need to lead AI development.
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Develop Hebrew-specific AI models: We need to harness this talent and focus on developing Hebrew-specific AI models. The global AI industry is dominated by English-centric models, leaving a significant gap in AI understanding and processing of Hebrew. Without proper Hebrew support, Hebrew speakers will not benefit as the world moves to smart chatbot-based interfaces for commercial and many other services. Governments should incentivize technology companies to focus on creating AI that effectively understands and processes Hebrew, ensuring that linguistic and cultural needs are met.
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Strengthen financial support and infrastructure: Both the private sector and governments need to step up financial support for AI ventures by providing funding, mentorship, and fostering partnerships with international AI leaders. Strengthening AI infrastructure such as high-performance computing facilities and advanced research labs will enable startups to develop and train advanced AI models locally. Without joint efforts, we will continue to fall behind, the gap will widen further, and it will become difficult to retain the talent we need to advance in the AI field.
The decline in AI investment in Israel is a wake-up call. We must act quickly to prioritize AI and leverage our unique strengths to remain competitive on the global stage. Making AI a national priority, attracting and retaining top talent, developing Hebrew-specific AI capabilities, preparing the workforce for future changes, and rethinking the education of our younger generations will ensure Israel remains a pioneer in innovation in the AI era.
Yaniv Golan is co-founder of Lool Ventures, a venture capital firm that invests in Israeli startups.
