Over the past few years, Artificial Intelligence (AI) has gone from something found in science fiction movies to becoming a reality with tools like ChatGPT.
Even if these AI tools aren’t true AI (yet), their popularity and incredible potential have attracted significant amounts of money from venture capitalists, large corporations, and others to fund research into this promising field.
There’s no doubt that AI has great potential, but many of the investors who have poured billions of dollars into it are starting to look for a return on their investment.
Unfortunately, for many businesses, AI-powered products haven’t delivered the benefits they hoped for — at least not yet.
Another challenge facing AI startups is that the big players are doing so well: OpenAI, which develops ChatGPT and Dall*E, is backed by deep pockets from Microsoft and has released two of the most popular AI tools to date.
These tools are used by both individuals and businesses, and premium subscriptions generate millions of dollars in revenue to support further development.
The thousands of startups in the space are nowhere near that level of success.
When it comes to technology companies, most big advances seem to come in cycles.
First, there is a lot of buzz in a particular space, which attracts investors who are willing to put a lot of money to work betting on the right companies that will change the industry.
Over time, the majority of startups fail, but the few that succeed eventually become household names.
In this cycle of AI, startups face some additional obstacles: The technology behind modern AI requires massive amounts of computing power and storage to operate properly.
This means that businesses have to purchase, or at least purchase access to, very powerful servers and network equipment.
Of course, this equipment isn’t cheap.
The need to support and even modernize this kind of infrastructure can quickly eat away at even the large cash reserves a startup may have acquired through initial and ongoing investments.
Databricks CEO Ali Ghodsi summed up the problem nicely:
“The signs are already there. It doesn’t matter how cool what you’re doing is, it just matters if it’s a viable business.”
Over the past three years, roughly $330 billion has been invested in 26,000 AI startups. As many of these companies fail and some fail to produce a usable product, investors will likely become hesitant to pump more money into these companies.
This will undoubtedly lead to additional financial strain and an increase in AI company bankruptcies.
Apparently artificial intelligence isn’t smart enough to make a profit.
If you liked this story, check out what happened when one guy gave ChatGPT $100 to make as much money as possible. The results were exactly as expected.
