"AI-adjusted" earnings are now a thing; Nobel Prize goes all-in on AI; Air Street Capital's State of AI report is out; Zoom looks to a future beyond video
Companies start looking for value in AI investments; Adobe's anti-scraping tool; India vying for Asia's AI crown; Microsoft's AI story gets complicated
Several reporters have been telling me that there's mounting skepticism of AI startups and their revenue potential among investors in the Valley. In my view, there are two contributing factors to this cooling off.
First of all, there's a very visible say-do gap between the mission of some high-profile AI startups and the products they're shipping. For example, companies are saying they're working on AGI or superintelligence but their product is actually an AI companion wrapped around GPT-4. Or changing the way people create content but shipping a PowerPoint clone. Or working on agentic AI but building a simple coding assistant. The issue here is obvious: there's no utility. Most of these products look great in a carefully orchestrated keynote presentation. But once people pay the money to use them for a month and realize they need to prompt them 50 times before they get anything remotely useful, they don't renew the month after. Therefore, the revenue for these companies looks like an inverted V, with the peak corresponding perfectly with them going viral on social media. That's not a sustainable, long-term way of building a customer base and recurring revenue.
Secondly, the post-dot com days of companies being valued in line with their revenue are over. Today, it’s all about the vibes or AI adjusted earnings: companies with no product and no revenue are raising hundreds of millions of dollars in a pre-seed round simply based on the fact that the founders came from Big Tech. The problem is that most of these founders are often researchers who've never shipped a product. In most Big Tech AI labs, researchers have access to massive compute and mostly work on AI models; if they’re lucky, they get to build a proof-of-concept demo before moving on to the next research project. And even the very few that take research into production almost never interface with go-to-market teams. As a result, these startups eventually turn into capital-intensive zombie companies which unnecessarily burn money on building a huge GPU cluster and training their own models just because that's what they used to do in their research days. They ship a half-baked product and then quietly disappear into the shadows because they can't find product market fit. They carry on for a year or two in a zombie state until they run out of money and are forced into an acqui-hire.
If investors want to break this cycle, they should stop looking for vibes and instead dig for rare gems, with product-minded founders focused on utility and on attaining the shortest path from research to product.
And now, here are the week’s news:
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Our top news picks for the week - your essential reading from the world of AI
Business Insider: OpenAI's AI-adjusted earnings numbers have echoes of Groupon and WeWork
Newcomer: The Bear Case for OpenAI at $157 Billion
Reuters: Google's Nobel prize winners stir debate over AI research
Air Street Capital: State of the AI report: 2024 edition
WSJ: Companies Had Fun Experimenting With AI. Now They Have to Show the Returns.
Forbes: Notion And Stripe Trust This Year-Old Startup To Make Sure Their AI Tools Work
MIT Technology Review: Adobe wants to make it easier for artists to blacklist their work from AI scraping
The Economist: India has a unique opportunity to lead in AI
Semafor: Talking through AI and the future of music with will.i.am
Wired: The Race to Block OpenAI’s Scraping Bots Is Slowing Down
Fortune: Whirlpool CIO says lessons learned from IoT hype cycle can apply to generative AI
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AI in the wild: how artificial intelligence is used across industry, from the internet, social media, and retail to transportation, healthcare, banking, and more
Fortune: Fitness app Strava has a new AI coach—and its whacky comments are going viral
9to5Google: Google Photos starts rolling out AI-powered ‘Ask Photos’ following waitlist sign-ups
VentureBeat: CareYaya’s QuikTok is AI phone companion for lonely aging adults
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Interesting trends and developments from various AI fields, companies and people
Reuters: Wegovy maker Novo Nordisk bets big on talent, AI partnerships in India
Reuters: Tesla's robotaxi push hinges on 'black box' AI gamble
404 Media: ‘I Applied to 2,843 Roles’: The Rise of AI-Powered Job Application Bots
New York Times: Can a Start-Up Help Authors Get Paid by A.I. Companies?
VentureBeat: Can AI really compete with human data scientists? OpenAI’s new benchmark puts it to the test
VentureBeat: New high quality AI video generator Pyramid Flow launches — and it’s fully open source!
VentureBeat: Walmart bets on multiple AI models with new Wallaby LLM
Fortune: At 100 Best Companies in Europe, high levels of trust sets the stage for AI
Fortune: AI fears and 4-day workweek dreams—here’s what a survey of hundreds of interns reveals about Gen Z
The Guardian: Meta launches its AI chatbot in the UK on Facebook and Instagram
The Guardian: Google DeepMind scientists and biochemist win Nobel chemistry prize
TechCrunch: Fei-Fei Li picks Google Cloud, where she led AI, as World Labs’ main compute provider
TechCrunch: OpenAI to open offices in Singapore, Paris, Brussels to facilitate global expansion
Bloomberg: Amazon Unveils AI Tool to Help Drivers Find Packages Faster
The Verge: Zoom will let AI avatars talk to your team for you
The Information: AI Can Jump-Start Consumer Brands, Investors and Founders Say
VentureBeat: Gradio 5 is here: Hugging Face’s newest tool simplifies building AI-powered web apps
VentureBeat: Google’s Gemini enterprise coding assistant shows enterprise-focused coding is growing
VentureBeat: Hailuo gets feature competitive launching image-to-video AI generation capability
Fortune: Wimbledon will evict line judges from its tennis matches after 147 years—and turn to AI instead
Business Insider: Advertisers are scrutinizing the value of AI tools as some early efforts fall flat
Business Insider: One of Amazon's top AI executives is out
The Information: OpenAI Leaders Say Microsoft Isn’t Moving Fast Enough to Supply Servers
Digiday: TikTok joins the AI-driven advertising pack to compete with Meta for ad dollars
Bloomberg: Meta Launches Generative AI Video Tools for Advertisers
WSJ: OpenAI, Hearst Strike Deal for Newspaper, Magazine Content Integratio
Fortune: Hugging Face cofounder Thomas Wolf says open-source AI’s benefits far outweigh its risks
FT: Samsung issues public apology after falling behind on AI
Business Insider: Geoffrey Hinton, the 'godfather of AI' who warned of its existential risk, awarded Nobel Prize for Physics
Business Insider: Want to get into the AI industry? Head to Abu Dhabi.
MIT Technology Review: Forget chat. AI that can hear, see, and click is already here.
WSJ: Grindr Aims to Build the Dating World’s First AI ‘Wingman’
WSJ: Google’s Grip on Search Slips as TikTok and AI Startup Mount Challenge
VentureBeat: Inflection helps fix RLHF uninformity with unique models for enterprise, agentic AI
WSJ: One of the Biggest AI Boomtowns Is Rising in a Tech-Industry Backwater
MIT Technology Review: People are using Google study software to make AI podcasts—and they’re weird and amazing
Business Insider: Sovereign AI explained: An AI cloud CEO unpacks what's behind the trend
The Atlantic: We’re Entering Uncharted Territory for Math
The Economist: An adult fruit fly brain has been mapped—human brains could follow
FT: Artist Lawrence Lek is using AI to explore whether robots can suffer
The Economist: AI and globalisation are shaking up software developers’ world
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