ChatGPT and generative AI look like tech's next boom. They could be the next bub...
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ChatGPT and generative AI look like tech's next boom. They could be the next bubble.
The buzz behind ChatGPT is fuelling investment into other generative AI startups.
In the last three months, AI startups have raised big rounds at high reported valuations.
The business models are unproven, and running AI involves high computational costs.
OpenAI's release of ChatGPT and the immediate, subsequent buzz has put generative AI on the map for venture capitalists and tech firms eager to put money into a smart idea in a downturn where smart ideas feel scarce.
Generative AI is the catchall term for artificial intelligence that can create something new — text or images for example — from existing data, when given prompts. OpenAI's generative AI tools can seemingly do anything from write poetry and code to producing frame-worthy art, triggering huge excitement in the space.
And venture capitalists and companies want to get in early on tech that has the potential to be transformative — especially at a time when most tech moonshots aren't working out.
For example: Microsoft is weighing up whether to invest a further $10 billion in OpenAI at a $29 billion valuation, according to reports, having first invested $1 billion in 2019.
AI copywriter Jasper AI raised $125 million in Series A funding in October – high for an early-stage round at the tailend of dismal funding year for startups.
And in December, New York-based Runway, which uses AI tools to aid in video editing, raised $50 million at a $500 million valuation.
These are notably large individual deals, and this year looks set to see the funding rush continue.
But are we headed for an AI bubble?
—François Chollet (@fchollet) January 8, 2023
The wild revenue multiples are here
One sign of frothiness in private tech startups is whether their valuations seem out of whack with their business potential.
Generative AI startups are already securing sky-high valuations despite little evidence of commensurate revenue, let alone profit — reminiscent of the low-interest-rate boom times that saw firms with unproven business models fetch valuations worth billions of dollars despite having little to show.
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