There has been a widespread fascination with artificial intelligence (AI) at least since the 1980s when The Terminator films took Hollywood by storm. Since late 2022, however, technology has broken new ground with the release of ChatGPT – an AI-driven chatbot which uses machine learning to write essays, poems, songs, articles and even streams of code. It is difficult to describe the level of disruption that this innovation has brought. Below, however, we attempt to paint a picture of the global AI market landscape in 2023, key players, new entrants, risks and opportunities for investors to consider in the years ahead.
Artificial intelligence in 2023: market overview
Given the permeation of AI into multiple verticals in 2023, it is difficult to accurately outline the scope of the global market. Many companies specialise in AI innovation, for instance, whilst others integrate machine learning into their service delivery (e.g. financial services and data modelling or automotive manufacturers and self-driving cars). One study puts the global AI market capitalisation at USD 136.55 billion in 2022, with an expected compound annual growth rate (CAGR) of 37.3% between 2023 and 2030. A lot of the innovation is happening in the US, where many tech giants are racing to become the “go-to” company for AI solutions. Even McDonald’s is putting its hat in the ring by acquiring Dynamic Yield for $300m, a startup in Tel Aviv intended to help provide a personalised customer experience using AI.
Key events and trends
ChatGPT was launched in November 2022 and became hugely popular in just a few weeks. Only two months later, the chatbot had 100 million monthly active users – exhibiting growth which far surpassed that of Instagram and TikTok in their initial months. Google was quick to recognise the potential threat to its decades-long domination of the search market. In February 2023 it launched Bard – its own experimental “conversational AI service” – powered by LaMDA. However, Google shares nosedived after a failed live demonstration where the AI answered a user query incorrectly. Microsoft arguably made a bigger PR “win” by announcing that its own search engine, Bing, and its Edge browser would be using an upgraded ChatGPT AI to power its “co-pilot” functionality. For instance, a user, in theory, would be able to view a 15-page PDF guide in their Bing search results and ask the AI chatbot to summarise it in 300 words.
Right now, it is fair to say that there is widespread excitement about AI in 2023 and where it could take us. The potential applications are certainly enormous. Yet investors should be wary of over-hype. In 2001, for instance, the dot-com “boom and bust” hurt many investors who had become carried away with internet-based companies. The current excitement about AI should not justify overlooking investor due diligence and jumping on a “bandwagon”.
Potential AI applications
Google and Microsoft may be taking a lot of the AI limelight in early 2023. Yet the potential AI applications are huge, ranging from aerospace to healthcare, manufacturing, automotive and more. This creates a lot of space for startups to integrate AI into their business models, not just large public companies. Shield AI, for instance, is a US-based startup looking to develop AI piloting technology to “Revolutionize battlefields and commercial aviation”. The company attracted $225 million in Series E funding in 2022 and now stands at $2.3 billion in valuation. Deepgram uses AI to transcribe real-world audio using a speech-to-text API. It drew $47 million in Series B funding in 2022. Fathom provides innovations in medical coding automation powered by AI. It recently gained $46 million in Series B funding in 2022.
Future opportunities & risks
Investors have a difficult balance to achieve with AI investments. Certainly, AI holds enormous growth potential in many exciting areas. Yet AI is still in its infancy, despite the huge forward strides of recent years. Investors should be aware that the AI application potential varies across industries. In 2023, driverless cars are already available to some extent, with US-based Tesla leading the innovation charge. Within financial services, however, it may still be a while before AI can fully replace human financial advisers – despite some impressive growth in the “robo-adviser” market.
A huge consideration for investors is customers’ willingness to accept AI-powered solutions from vendors. Only 20% of car customers are interested in a vehicle which is fully automated, for instance, and US-based financial advisor clients would still overwhelmingly prefer to deal with a human advisor rather than a robot. However, search engine users certainly appear more willing to give AI a try. This is partly because 59% of users do not understand how AI currently plays a role in search engines. However, the ease and speed of AI chatbots is very attractive.
One issue for investors is that the algorithms powering AI innovations are largely misunderstood – requiring huge technical knowledge to competently “look under the hood”. One timeless maxim for investors is to avoid investments that they do not understand. To help overcome knowledge gaps with AI, investors should consider joining a specialist investor network. Not only will this help you access pre-vetted investment projects, but you can also rub shoulders with people from a range of technical backgrounds – helping you with your due diligence process.
Conclusion
If you are interested in expanding your portfolio into these kinds of exciting spheres of investing, then we invite you to get in touch with us here at Bure Valley and to consider joining our exclusive investor network:
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