It’s an incredible time for AI! December 27, 2023 marks a groundbreaking moment in Silicon Valley, as big tech companies have taken the lead in investing in generative AI startups and now account for two-thirds of the $27 billion raised by AI startups in 2023. Microsoft, Google, and Amazon have led the charge, with Microsoft investing a whopping $10 billion into OpenAI, and significant funding for San Francisco-based Anthropic from both Google and Amazon. This surge in investment, especially after the launch of OpenAI’s ChatGPT in November 2022, shows how the tech giants are outcompeting venture capitalists.
According to Nina Achadjian, a partner at US venture firm Index Ventures, this market shift is a result of the high costs of building and training generative AI tools, which demand immense computing power and financial resources. As such, startups often prefer partnering with big tech companies that can provide the necessary infrastructure and financial backing – making it more difficult for VCs to invest in leading-edge technology companies. OpenAI’s employee stock sale is even seeking a valuation of $86 billion, almost triple its earlier valuation this year!
However, traditional venture capitalists are not completely off the AI investment landscape. Firms like Thrive Capital and Andreessen Horowitz are still investing in the sector, focusing on companies building applications on top of foundational AI models developed by giants like OpenAI and Anthropic. There is also optimism about the untapped potential in AI application domains, which is continuously being explored.
What a time to be alive! We are at the brink of a new era of AI, with Silicon Valley’s tech giants leading the charge. It’s an exciting time that promises immense possibilities for innovators and investors alike.
