Sceptical Investors Worry Whether Advances in AI Will Make Money

Silicon Valley VCs fearing a repeat of falling crypto values warn against pouring cash into hype-fuelled start-ups. From a report: Gordon Ritter, founder of San Francisco-based venture fund Emergence Capital, believes that recent developments in the field of artificial intelligence represent a significant technological advance. He just cannot see a way to make money out of them. 'Everyone has stars in their eyes about what could happen,' says Ritter, whose firm was an early investor in successful start ups such as Zoom. 'There's a flow [of opinion that AI] will do everything. We're going against that flow.' The scepticism reflects a tension among Silicon Valley VCs, who are caught between excitement over AI and a broader tech downturn that has led to falling investment in start-ups over the past year. But the recent launch of 'generative AI' tools such as OpenAI's ChatGPT chatbot, capable of answering complex questions with text in natural-sounding language, has resulted in fresh excitement over the potential emergence of a new group of industry-defining companies.

Many VCs express caution, put off not only by eye-watering valuations, but also the huge amount of capital AI groups require as they build 'foundation models' -- machine-learning systems that require huge amounts of data and computing power to operate. One investor said that, because of the huge amount of capital and computing resources required, recent leaps in generative AI were comparable to landing on the moon: a massively impressive technical achievement, only replicable by those with nation-state level wealth. 'Companies are extremely overvalued and the only justifiable investment thesis is to get in incredibly early,' said another veteran investor. 'Otherwise you're only buying in because of FOMO.'

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