LONDON – French startup Mistral AI recently raised a staggering €105 million ($118 million) in one of Europe’s largest-ever seed rounds, even though it didn’t have a working product. This exemplifies the feverish excitement surrounding “generative” artificial intelligence, capable of creating original content based on user prompts. However, concerns are growing about a potential bubble, with money flowing into companies lacking earnings, innovative products, or expertise.
Investors have poured $15.2 billion into generative AI companies globally in the first half of 2023, with Microsoft’s $10 billion investment in OpenAI being a significant portion of that sum. The release of ChatGPT, OpenAI’s generative AI chatbot, fueled much of the excitement. Venture capitalists are increasingly interested in generative AI, but they remain cautious about filtering out substance from hype in founders’ pitches.
Despite the current boom, some worry that the “dot-ai” bubble may result in a pop, akin to the dot-com bubble of the late 1990s. Stocks on the tech-heavy Nasdaq index have risen significantly, with Nvidia, a microchip maker for generative AI, reaching a market capitalization of $1 trillion. However, Nvidia’s price-to-earnings ratio has raised concerns about overvaluation.
Investors and industry experts are finding it challenging to identify long-term winners in the generative AI space. The excitement surrounding AI’s potential is reminiscent of the tech bubble in the 1990s, where companies capitalized on the dot-com hype, but many failed to generate revenue or profit.
As generative AI continues to gain attention, it remains crucial for investors to discern between real AI companies and those merely attaching “dot-ai” to their names. Some experts believe that AI will revolutionize various industries and create trillions of dollars in economic value. However, the market’s current enthusiasm is yet to translate into concrete fundamental results. While AI investment is booming, whether it’s all hype or genuine value remains a critical question for investors.