Is The AI Hype For Real? $20B In Investments Says Yes

As every investor and their French Bulldog scrambles to get in on the AI action, we look to the data for answers.

Ironically, we can’t even define “AI” as a sector per se since almost every startup looking for some coin or decent press suddenly identifies as an “AI-centered-something-or-other.”

But for the purists, the numbers don’t lie — or in the very least they tell a clearer story than the prevalent “AI will save the world” narrative.

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In fact, early this week investors poured $700 million into two AI startups — Builder.ai and Anthropic — and followed up mid-week with another $105 million to AI marketing platform Insider. It seems we’ve reached another level of the AI craze that has dominated the private markets since late last year.

Overall, $20 billion has been raised by startups using “AI” in 2023. (Fun fact: $20 billion could pay the salaries of 307,266 teachers for one year.) But let’s definitely keep making those AI-generated selfies.

So much buzz

Are startups worried about the downturn? We guess it depends on who writes their checks.

In fact, Bessemer Venture Partners, one of the oldest and more established venture firms in the U.S., earlier this year said it is earmarking $1 billion of its most recent fund solely for investments in artificial intelligence.

And that’s just one firm.

This week we published an interview with Bessemer partner Sameer Dholakia, who aptly said of the AI movement: “Literally trillions of dollars of value gets created when you have these massive tectonic shifts.”

And what about AI IPOs?

But it’s not all unicorns and rainbows for AI. Just because funding to the sector is hot, that doesn’t mean the appetite on the public markets is at the same level.

If we look at public markets (and we did) it’s clear that an AI focus hasn’t been a recipe for stock market gains. This is evident looking at recent performance of the most highly valued AI-oriented companies to go public in the quarters leading up to the market peak.

Back to the future

Let’s circle back to those trillions that Bessemer’s Dholakia was talking about. While we aren’t seeing the fruit of those hefty AI investments just yet, the promise (or at least the hope) among investors and the journalists that cover them is that these startups will deliver sooner rather than later.

According to Dholakia, the “adoption curve on this one will be mind-blowingly fast.”