Is AI hype the new crypto?
Sarah Guo moved on quickly from the crypto winter.
Six months ago, she was leading investment into the sector for venture capital firm Greylock, alongside her role as an angel investor in cryptocurrency exchange FTX.
FTX has since collapsed, along with cryptocurrency values. Guo hasn’t. Instead, she has raised more than $100mn for a new fund with a new focus: artificial intelligence.
Guo isn’t alone in pivoting fast towards a technology that has lit up Silicon Valley and given investors something to talk about other than the downturn. But a sizeable group remains unpersuaded, the FT’s George Hammond reports.
A string of “generative AI” platforms, aka tools such as OpenAI’s ChatGPT chatbot, which is capable of answering complex questions with text in natural-sounding language, have raised fresh cash in the past few months, at far higher valuations than in previous rounds.
Sceptics don’t doubt the technology’s potential. But they can’t see how to make money from it.
The money is going into “foundation models”, machine-learning systems that have the potential to disrupt everything from copywriting to medical diagnostics, but require huge amounts of data and computing power to operate.
They also require huge amounts of cash, and the layer of applications built on top of them — which many venture capitalists regard as the easiest way to make money on the technology — has yet to be developed.
With the chastening experience of the crypto crash in the recent past, some investors aren’t ready to place bets.
“Sometimes the bubble moves from one place to the other, the money has to go somewhere,” said one venture capital investor who saw a crypto bet sour last year. “During these hype cycles there will be many things which are overvalued — there are many toys.”