OpenAI’s ChatGPT release stirred the tech world, spurring investors and startups to exploit its potential. This blog analyses the ChatGPT Effect: AI stock surges and generative AI startup interest.
AI Stocks Surge as Investors Bet on Growth Prospects
OpenAI’s ChatGPT launch has reverberated across the stock market, igniting investor interest in AI-focused companies. According to a Reuters article, C3.ai, an AI software provider, experienced a 16% share surge due to robust Q4 and fiscal year 2023 projections. Likewise, ChatGPT’s impact led to gains of 5% to 20% for BigBear.ai, SoundHound AI, and Guardforce AI.
Especially, retail investors are gravitating towards smaller AI tool developers as tech giants Alphabet Inc. (Google’s parent) and Microsoft contend for AI dominance. However, while AI stocks are certainly surging, there are concerns that investors are getting ahead of themselves. As Adam Sarhan, CEO of 50 Park Investments in Florida, notes, “Artificial Intelligence could become the new gold rush on Wall Street…but it still needs some more time to mature a bit, better price action, and prove that it can generate profits for investors.”
ChatGPT Ignites Further Interest in Generative AI Startups
Generative AI has been generating interest among venture capitalists for a while now, but the release of ChatGPT has taken things to a whole new level. According to an article in VentureBeat, startups using generative AI raised eye-popping amounts of cash in the past year, even as VC investments declined overall. Jasper, which makes AI-powered marketing materials, raised $125 million in Series A funding, while Runway, one of the companies behind Stable Diffusion, the model that powers Lensa AI, received $50 million in Series C funding.
Generative AI valuations are high, and VCs are excited. While there is concern that limited partners, institutions that invest in VC funds, will limit contributions to VCs in the coming years, the feeling among investors is cautiously optimistic. Talia Goldberg, a partner at Bessemer, which invested in Jasper, said, “We think there will be exciting investments and companies built across all three of those sectors, but we’re most focused on the first and last one. We want to see companies delivering value to customers.” Erin Price-Wright, a partner at Index Ventures, predicts that AI could evolve into what cloud and software sectors are today: essential technology used by nearly every modern business. Price-Wright said, “We do expect to see the rate of VC dollars going into AI to continue to accelerate. But we don’t see AI as an investment category as much as a broader platform shift, like the cloud 10 years ago.”
The ChatGPT Effect on the Future of AI
Undoubtedly, the ChatGPT Effect significantly influences the future of Artificial Intelligence, shaping technology and investor perception. Technologically, ongoing progress in generative AI is anticipated, with faster advancements on the horizon. As the VentureBeat article notes, “Founders that can figure out now how to harness ChatGPT before it makes the next evolutionary leap come with a built-in promise of a product that will assuredly get much better.”
Nonetheless, apprehensions persist about inflated valuations and unsustainable growth for startups due to the hype around OpenAI’s ChatGPT and generative AI. Notably, some VC investors, highlighted in the BuiltInNYC article, remain cautious about the market. In 2023, they intend to allocate funds more prudently despite a $290 billion investment pool. Concerns of a potential bubble forming around generative AI loom, given the sector’s robust funding and enthusiasm, surpassing fields like fintech and e-commerce. Despite these concerns, the potential for generative AI is enormous, and investors are eager to capitalise on it. As Erin Price-Wright, a partner at Index Ventures, notes in the VentureBeat article, AI could evolve into what the cloud and software sectors are now: essential technology used by nearly every modern business. This sentiment is echoed by Adam Sarhan, CEO of 50 Park Investments, who believes that “AI could become the new gold rush on Wall Street.”
The Future of AI and Ethics
As AI continues to advance, concerns over the ethics of the technology are also growing. Concerns about AI misuse and malicious intent have spurred demands for regulatory and ethical frameworks. Balancing AI development with ethics is crucial for humanity’s benefit. OpenAI has led this discourse and taken measures to ensure ethical technology creation. In 2019, it withheld its language model’s full version due to misuse apprehensions. The organisation has also developed an ethical framework for AI development, which includes principles such as transparency, safety, and fairness. However, the responsibility for ethical AI development cannot solely rest on the shoulders of organisations like OpenAI. It is up to all AI developers, researchers, and stakeholders to ensure that the technology is developed in an ethical manner. As the use of AI becomes more widespread, it is imperative that ethical considerations are at the forefront of all Artificial Intelligence development and implementation.
Impact on Jobs and Business
According to Goldman Sachs experts, the most recent generation of artificial intelligence, which includes tools like ChatGPT, has the potential to automate up to 300 million full-time jobs globally. They predict that 18% of labour worldwide might be computerised in a recent analysis, with mature economies seeing more of an impact than emerging nations.
Industries requiring physical labor, such as construction and repairs, would see minimal effects. In contrast, white-collar roles like administrative assistants and attorneys might encounter significant changes. Roughly two-thirds of jobs in the US and EU could undergo AI automation to some extent, potentially allowing up to a quarter of tasks to be fully AI-driven. Should generative artificial intelligence, like ChatGPT, realise its full potential, it could bring about substantial shifts in the labour market.
Goldman Sachs analysts emphasise that, historically, tech innovation yields long-term job growth despite initial displacement. Widespread AI adoption over a decade might raise global GDP by 7% annually and bolster labor productivity. AI is predicted to augment, not wholly replace, jobs, especially those with marginal automation susceptibility. This could shift surplus capacity to productive tasks, elevating overall efficiency. For example, US projections indicate AI replacing 25% to 50% of workloads, cutting labor costs, creating new roles, and enhancing productivity for others. Comparable productivity surges, like those seen with electric motors and personal computers, could result.
Conclusion
The ChatGPT app’s impact spans AI’s landscape, from tech evolution to investor interest and ethics. OpenAI’s model sets a generative AI standard with broad applications. AI’s progress entails challenges – ethics, regulation. All stakeholders must foster ethical AI for humanity’s good. ChatGPT’s potential spotlighted, emphasising responsible AI growth.
In summary, the ChatGPT effect exemplifies tech’s profound influence. While AI advances, ethical concerns persist. The future shines for AI, with responsible development as our duty.
Amit Khanna, 7startup Founder
Amit has two decades of experience in the industry and an MBA. He supports entrepreneurs with every aspect of their business including concept and product development, investor presentations, and fundraising. Amit & 7startup assist startups in the pre due-diligence process and help connect them to our vast network of investors. Reach out to us today and see if we’re a fit!
