A New Area of A.I. Booms, Even Amid the Tech Gloom

Five weeks ago, OpenAI, an artificial intelligence lab in San Francisco, released ChatGPT, a chatbot that answers questions in clear, concise prose. The AI-powered tool immediately went viral, with over a million people using it to create everything from poetry to high school term papers to rewriting Queen songs.

Now OpenAI is in the midst of a new gold rush.

Two people with knowledge of the discussions say the lab is in talks to complete a deal valued at around $29 billion, more than double its valuation in 2021. The potential deal – in which OpenAI would sell shares of the existing company in a so-called public tender offer – could total $300 million, depending on how many employees agree to sell shares. theirs, they said. The company is also in discussions with Microsoft – the company invested 1 billion dollars in it in 2019 — for more money, the two said.

The buzz surrounding OpenAI shows that even during the worst tech downturn in a generation, Silicon Valley’s transaction-execution machine is still working. After a modest year including Mass layoffs and cutsTech investors — a naturally optimistic bunch — are eager to catch up on a hot trend.

No field generates more excitement than general artificial intelligence, the term for technology that can generate text, images, sound, and other media in response to brief prompts. Investors, experts and journalists have been talking about artificial intelligence for years, but the new wave – the result of more than a decade of research – represents a stronger and more mature breed of AI.

This kind of AI promises to reinvent everything from online search engine like Google arrive Photo and graphic editor like Photoshop arrive digital assistants like Alexa and Siri. Ultimately, it could provide a new way of interacting with almost any software, allowing people to converse with computers and other devices as if they were chatting with another person.

That has made trading around developed AI companies overwhelming. Jasper, an innovative AI startup founded in 2021, raised $125 million in October, valuing it at $1.5 billion. Stable AI, an image creation company founded in 2020, raised $101 million that same month, valuing it at $1 billion. Smaller AI companies, including Character.AI, Replika, and You.com, are also attracting investor interest.

According to data from PitchBook, which tracks financial activity across the industry, by 2022, investors have pumped at least $1.37 billion into high-yield AI companies in 78 transactions, roughly equal the amount of money they have invested in the previous 5 years combined.

OpenAI is valued at $29 billion previous report of the Wall Street Journal. The two said venture capital firms Thrive Capital and Founders Fund could buy shares in the public offering. Since OpenAI started as a non-profit company, determining its exact value is difficult.

OpenAI, Thrive Capital and Founders Fund were unavailable for comment on the proposed investment.

Companies have been developing generalized AI for years, including tech giants like Google and Meta as well as ambitious startups like OpenAI. But the technology didn’t gain public attention until last spring, when OpenAI unveiled a system called DALL-E allows people to create realistic images just by describing what they want to see.

That has inspired entrepreneurs to rush in with new ideas and investors to make sweeping claims of disruption. Their enthusiasm reached new heights in December after OpenAI released ChatGPT, with fans embracing the technology to create love letters and business plans.

“It’s the kind of new ‘mobile’ paradigm shift we’ve all been waiting for,” said Niko Bonatsos, an investor at venture capital firm General Catalyst. “Could be even bigger.”

Investors at Sequoia Capital Written That innovative AI has “the potential to create trillions of dollars in economic value.” And Lonne Jaffe, an investor at Insight Partners, said: “There’s definitely a factor that makes this look like the early launch of the Internet.”

Google, Meta, and other tech giants have been reluctant to release generic technologies to the wider public because these systems often generate malicious content, including wrong information, hate speech and prejudiced images against women and people of color. But newer, smaller companies like OpenAI – less concerned with protecting established corporate brands – are more willing to take the technology to the public.

The techniques needed to build general AI are widely known and are freely available through academic research papers and open source software. Google and OpenAI have the edge because they have access to the deep pockets and raw computing power that are the cornerstones of the technology.

However, many top researchers from Google, OpenAI, and other leading AI labs have set themselves up in recent months to set up new startups in the field. These startups have already received some of the biggest funding rounds, with the excitement around ChatGPT and DALL-E spurring venture capital firms to invest in even more young companies.

More than 450 startups are currently working on innovative AI, by the number of a venture capital firm. And the frenzy has been compounded by investors’ eagerness to find the next big thing in a bleak environment.

Michael Dempsey, an investor at venture firm Compound, said the tech downturn — which last year included a crypto crash, underperforming stocks and numerous layoffs — has provided a temporary pause. quiet for investors.

After that, “everyone is excited about AI,” he says. “Honestly, people need something to tell investors or themselves that there’s a next thing to get excited about.”

Some worry about the hype surrounding innovative AI that has gotten ahead of reality. The technology has raised ethical conundrums around how general AI might affect copyright and whether companies need to get permission to use their algorithm training data. are not. Others believe that big tech companies like Google will quickly beat the upstarts, and that some newcomers have little competitive advantage.

“There are a lot of groups without any AI capabilities that are advertising themselves as AI companies,” Mr. Dempsey said.

Those concerns haven’t slowed the excitement, especially after the arrival of AI Stabilization in October.

The startup helped fund an open-source software project that rapidly builds imaging technology that works like DALL-E. The difference is that while OpenAI only shares DALL-E with a handful of testers, the open source version of Stability AI — Stable Diffusion — can be used by anyone. People quickly used the tool to create realistic images of everything from a medieval knight crying in the rain to Disneyland painted by Van Gogh.

In the ensuing excitement, Eugenia Kuyda, founder and CEO of start the chat bot Replika, said in an interview that she has been contacted by “every VC firm in Silicon Valley,” or more than 30. She took their call but decided against further funding because her company, founded in 2014, was profitable.

She said: “I feel like someone who got to the airport a week early for a flight – and now it’s on board.

Character.AI, another chat bot company, and You.com, which is adding chat technology to its internet search engine, have also received interest from venture capitalists, companies said.

Sharif Shameem, an entrepreneur who built a searchable database for images created by Stable Diffusion in August called Lexica, says his tool quickly reached one million users. — a sign that he should switch from his current startup to focus on Lexica. Within weeks, he had raised $5 million in funding for the project.

Mr. Shameem compared the moment around innovative AI to the advent of the iPhone and mobile apps. “It feels like one of those rare opportunities,” he said.

Insight Partners’ Jaffe said his firm has since encouraged most of the companies in its portfolio to consider incorporating generative AI technology into their offerings. “It’s hard to think of a company that can’t use it in some way,” he said.

Radical Ventures, a venture firm in Toronto, one of the global AI research centers, was founded 5 years ago specifically to invest in this type of technology. It recently launched a new $550 million fund dedicated to AI, with more than half of it invested in innovative AI companies. Now those bets look even better.

Jordan Jacobs, a partner at Radical, said: “For four and a half years, people thought we were crazy. “Now, for the past six months, they’ve thought we’re geniuses.”