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Artificial Intelligence (AI) has become this year’s favorite buzzword, particularly after the successful launch of OpenAI’s ChatGPT. Now, investors are pouring tens of billions of dollars into startups specializing in generative AI — and new reports suggest that some of that funding comes at the expense of crypto companies. 

AI Investment Surges to Record High Levels

The launch of ChatGPT, an artificial intelligence chatbot developed by OpenAI, in November last year led to the start of an AI gold rush, particularly after it became the fastest-growing app in history. Several other tech giants, including Google and Alibaba, have raced to release their versions.

The rapid advancement of AI technologies captured the attention of VC firms globally. Investors from Shanghai to Silicon Valley started pouring tens of billions of dollars into AI startups in a bid to become involved in this booming market. 

In the first quarter of this year, the industry raised approximately $18 billion in funding. Among the leaders are noted companies such as OpenAI, SnaboxAQ, Alternyx, Adept AI, and Anthropic, according to data accumulated by MPost.

More specifically, OpenAI, the company behind ChatGPT, received $10 billion in a corporate round led by Microsoft. The company behind the viral chatbot Chat GPT has recently rolled out its latest AI model, GPT-4, which can process image and text inputs.

Furthermore, Palo Alto-based SandboxAQ raised $500 million in a venture round from prominent investors such as Time Ventures, Breyer Capital, T. Rowe Price, and Eric Schmidt. Alteryx also raised $450 million in a post-IPO debt round. 

According to leading data and analytics firm GlobalData, 3,198 AI startups received $52.1 billion in funding across 3,396 VC deals in 2022. The company noted that while AI funding initially saw a slight drop last year, there was a rebound in both VC funding deals volume and value in Q4 2022.

AI Funding Comes at the Expense of Crypto Companies

The recent surge in AI funding has negatively impacted crypto funding. According to Evan Cheng, founder of Mysten Labs, AI startups are now receiving crypto’s share of venture capital money, the crypto veteran said during a Word on the Block interview with Forkast News.

Cheng explained that early-stage crypto companies can still raise funds, though their valuations have been hurt due to the recent crypto meltdown. However, late-stage funding for startups has become harder, with only exceptional companies receiving support. 

“But once you get to the late Series A and Series B stage, the growth capital is hard to come by. It has to be an exceptional startup to get funded, unless you’re in the bubble of the excitement around generative AI right now, it’s going to be a lot harder for any startup to raise money.”

Despite the difficulty, Cheng said the situation presents an opportunity for developers to create an open and transparent infrastructure. He said that people have built products that serve tens of thousands, hundreds of thousands, or millions of customers before coming to the space and building products. 

“They are going to be younger, smaller, nimble, more experimental teams out there trying out brand new ideas, and a lot of them will fail. Some of them will be successful.”

AI Is the Most Revolutionary Technology in Decades

Since the recent AI boom, several experts have claimed that AI is the next big technological revolution that could bring significant changes worldwide. Bill Gates claimed that AI is the most revolutionary technology he has seen in decades, on par with computers, cell phones, and the internet.

Gates, whose tech company Microsoft is the biggest investor in OpenAI, has said that AI technologies could improve lives. In a March blog post, the billionaire said almost all businesses and industries would be impacted by the rise of AI. 

“The development of AI is as fundamental as the creation of the microprocessor, the personal computer, the Internet, and the mobile phone. Entire industries will reorient around it. Businesses will distinguish themselves by how well they use it.”

Gates added that AI could help scientists develop vaccines, teach students math, and replace jobs in task-oriented fields like sales and accounting. “The rise of AI will free people up to do things that software never will—teaching, caring for patients, and supporting the elderly, for example,” he wrote.

Cathie Wood, CEO and co-founder of Ark Investment, has also echoed the same point of view. In the firm’s “Big Ideas 2023” report, she estimated that if AI vendors can realize just 10% of the value created by their products, AI software could produce $14 trillion in revenue by 2030. 

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