Gen AI, the next big… bubble?

The Future.  With the release of generative AI programs like ChatGPT and DALL-E, investors are pouring money into what they think will be tech’s next big thing. But gen AI’s business models are still purely theoretical, and given the lack of concrete data supporting its commercial success, we may be witnessing the makings of another bubble.

Generating hype
Everyone and their mother is investing in gen AI.

• Microsoft might invest another $10B in OpenAI– and it’s already invested billions.
• Jasper AI, an AI copywriter, raised $125M in Series A funding for a $1.75B valuation in 2022 – what had been a terrible fundraising year for most.
• AI video editor Runway, meanwhile, raised $50M for a $500M valuation.

OpenAI’s valuation came in at $29B last year.

Doesn’t add up
The problem: these valuations often exceed their companies’ prospective revenue streams by several orders of magnitude — up to 300,000%, in OpenAI’s case (!). Because AGI business models are unproven — and only huge companies have been able to afford gen AI models’ exorbitant training and upkeep costs — investors’ wildest dreams for the technology are just that: dreams.

It might be time to wake up.