If you’re searching for unicorns, you might want to look in the generative AI space.
A report published Tuesday (Oct. 17) by venture firm Accel says generative artificial intelligence (AI) companies are now the main driver of “unicorns,” or startups valued at $1 billion. In fact, 60% of new unicorns fall into that category.
Accel partner Philippe Botteri said in the report that the findings show a “new normal” settling in, with valuations, investment levels and unicorn creation returning to 2019 levels.
“That said, today is a very different environment,” wrote Botteri. “Companies have moved away from growth at all costs to focus on profitability, and GenAI is redefining the potential of software, bringing the opportunities for enterprise automation and productivity improvement to a new level.”
Meanwhile, the Accel report found that American tech giants such as Google and Amazon added $2.4 trillion to their market capitalizations during this year’s AI fervor, with the share prices of Apple, Microsoft, Google, Amazon and Nvidia climbing 36% on average in the last year.
The report also showed that funding for European and Israeli GenAI startups neared $1 billion in the last 12 months compared with more than $14 billion for U.S. firms. However, $10 billion of the U.S. figure went to just one company: ChatGPT creator OpenAI.
Europe now produces 50% more AI publications than the United States with a similar citation rate, the report said.
In an interview with Reuters Tuesday, Botteri said that a “very limited number of companies” have “attracted a disproportionate amount of the capital,” while investment in foundational models like the ones created by OpenAI will decline.
“In the future, the money is going to be directed more towards a company like Synthesia for developing applications, then we are going to get to a more normalized balance where we expect a two-to-one (funding) ratio between the U.S. and Europe,” said Botteri.
The report follows comments last week by Yanev Suissa, the founder of venture capital firm SineWave Ventures, who said that the AI investment bubble will likely pop in the next year, though the technology itself will remain.
“AI is the next revolution in tech, but it’s also been around forever,” Suissa said in an interview with Seeking Alpha. “It’s one of those things that’s going to pop and it’ll be a huge pop. And then it’ll sort itself out, right?”
He posited a scenario in which a generative AI chatbot puts forth something inappropriate dealing with race, or with America’s next presidential election, uprooting the AI sector. He also predicted that AI could end up like blockchain, a tool that businesses use to improve efficiency but not its own thing.
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