After a stagnation period earlier this year, the tech industry is experiencing a revival, thanks to the rise of generative artificial intelligence (AI). The tech world, which once grappled with decreased profits and job cuts, especially after the pandemic and rising federal interest rates, is now finding hope in this AI segment.
According to Ali Javaheri from PitchBook, there was a noticeable dip in both venture capital funding and startup valuations. This decline, he says, resulted largely from the interest rate increase and a subsequent reduction in liquidity.
However, the current upswing in generative AI seems to be rejuvenating the industry. Javaheri observed, "AI, particularly generative AI, has remained robust, becoming a significant hub for funding, contrasting with the general tech domain."
OpenAI’s ChatGPT tool's public release last November is further accelerating the sector's growth. Generative AI has secured $14.6 billion in U.S. venture capital deals just this year, a remarkable leap from the combined $11 billion investments of 2021 and 2022. Globally, generative AI witnessed $51.9 billion in venture capital activities in 2023, a striking contrast to the approximate $14 billion from the two preceding years.
WedBush's Dan Ives believes generative AI to be as game-changing as the 1995 World Wide Web emergence. Highlighting the immense investments coming into the tech realm, Ives emphasized the role of tech behemoths like Microsoft and Google, which have prioritized AI. He warned, "In the current AI-driven era, not investing could mean losing out to competitors."
Partnerships like Microsoft's with OpenAI, a deal supposedly worth $10 billion, and Google's ChatGPT alternative, Bard, launched in February, underscore the significance of AI. Sundar Pichai, Alphabet's CEO, has affirmed Google's concentrated efforts towards capitalizing on AI's potential. Similarly, Meta, Facebook's parent company, introduced its Llama 2 language model this July.
Tech Job Dynamics Shifting with AI's Rise
2023 observed significant layoffs in the tech industry, even impacting giants like Google, Meta, and Microsoft, culminating in about 108,000 layoffs in January, based on Trueup.io statistics. However, by August, these figures seemed to stabilize.
With the broader acceptance of generative AI, job openings in this sector have surged, as indicated by Indeed Hiring Lab data. There was a 122% growth in generative AI job ads in July relative to the same month in the prior year, and a whopping 243% increase from two years ago. Conversely, roles in software development and information design have seen a significant decline.
The Future of AI in Job Markets
Despite AI's promising prospects, its potential to displace jobs remains a concern among policymakers and regulators.
Patrick Hall from the George Washington University School of Business believes the excitement surrounding generative AI could be "overstated." He referenced concerns from a decade ago about "computer vision."
However, he points out that the latest AI tools, built on large language models like Bard and ChatGPT, have an advantage: ease of use for both individuals and businesses. This accessibility, Hall notes, is what truly distinguishes generative AI from previous innovations.