Investors are growing increasingly weary of AI

The AI industry is experiencing a downturn after enjoying years of abundant funding, as a report from Stanford’s Institute for Human-Centered Artificial Intelligence reveals. Global investment in AI declined for the second consecutive year in 2023, with both private investments in startups and corporate mergers and acquisitions witnessing a slump compared to the previous year.

While the overall investment in AI dropped by 20% in 2023, certain ventures like Anthropic and Inflection AI continue to attract substantial investments. The market landscape is shifting as major players establish their positions, leading to a more discerning investment environment focused on existing AI products and services.

Experts attribute the investment decline to slower growth in the AI sector and the challenges involved in scaling AI technologies for real-world applications. Additionally, investors are becoming more cautious due to overreliance on projected exponential growth to justify sky-high valuations of AI startups.

Despite the overall malaise in AI investing, generative AI, which involves creating new content like text, images, and music, stands out as a bright spot. Investments in generative AI startups surged in 2023, although some investors remain wary of its long-term potential and actual impact on productivity.