December 1, 2023

2022 was the year the tech sector’s bubble burst. Stock prices withered and valuations crumbled amid rising interest rates and slowing advertising revenue. Companies that overexpanded during the pandemic are rushing to cut jobs and costs.

But even as one bubble pops, another is already forming. OpenAI, the company behind the artificial intelligence bot ChatGPT that has taken Silicon Valley by storm, is in talks to raise capital at a valuation of almost $30bn. A deal would mark a sharp step up from the $20bn the company was last valued at in 2021. It would also come despite OpenAI having revenues that one report pegs in the “low tens of millions of dollars.”

Generative AI, a type of artificial intelligence that is capable of producing original content from scratch, is hyped as the next big thing. An up-round fundraise for OpenAI could mark 2023 as a breakthrough year for the sector.

Investors poured $1.37bn into generative AI start-ups in 2022, according to PitchBook. That is almost as much as the amount invested in all of the previous five years combined. 

Generative AI promises huge productivity gains. For example, a company can use it to write product descriptions, allowing its employees to focus on more important tasks.

OpenAI’s ChatGPT only made its public debut last month. But the chatbot, which can converse with users, surpassed 1mn users in five days. Its success has even prompted speculation that it can challenge Google in online search. 

That seems like a stretch for now. ChatGPT may be able to write haikus and coherent-sounding essays. But errors are rife and there are worries that the technology could end up spreading misinformation at scale. Stack Overflow, the Q&A website for software developers, has banned ChatGPT from its site because the responses cannot be trusted. Watching AI generate real-time content creation is entertaining. But OpenAI will need to parlay its viral success into cold, hard profits.

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