The AI ​​boom is helping Silicon Valley forget about the wave of layoffs

In San Francisco, it is suddenly impossible to escape the AI ​​hysteria. in Bars and restaurants, people are talking about using ChatGPT and whether AI will take over their jobs – or take over the world. Artificial intelligence is one of the only areas still hiring here, and companies pay huge salaries for expertise. Workers here are retrained to specialize in this field.

The new AI gold rush—spurred in large part by the release of OpenAI’s ChatGPT software in November—is thanks to generative AI, which uses complex algorithms trained on trillions of words and images from the open internet to produce text, images, and audio.

“The improvement in quality has been much greater than expected,” Dan Wang, a business professor at Columbia University who studies the tech industry, said of the advent of generative AI. “It surprised people and also fired the imaginations of existing entrepreneurs and aspiring entrepreneurs.”

Find out why AI like ChatGPT is getting so good, so fast

After OpenAI released ChatGPT, Microsoft and Google joined the arms race. While they had shown relatively earlier to caution About launching experimental AI tools for real people, the two companies suddenly raced to rivalry by rolling out text generators in their core products, including Microsoft Word and Google Search.

In Google’s latest Alphabet earnings call, CEO Sundar Pichai mentioned artificial intelligence 34 times in his opening statements, up from five times last year. Later, a video of him saying “AI” at the company’s development conference went viral on social media.

“We are at an exciting inflection point,” Pichai said at the conference. “We’re reimagining all of our core products.”

Facebook and Amazon have been promoting their AI work, and Apple is expected to highlight AI research during its big product launch event this week.

Companies are also putting money where their mouths are, and one of the biggest beneficiaries so far has been Nvidia.

The company’s video game computer chips have been used by researchers and companies for several years to help them run the massive and complex algorithms needed to train sophisticated AI programs. The company began making specialized AI products and software and has already seen its share price quadruple from the end of 2019 through the beginning of 2023.

But it announced last week that it expects to sell $11 billion in new chips in the second quarter of this year, $4 billion more than Wall Street analysts expected. Inventory It jumped 24 percent. It closed with a market valuation of $971.4 billion on Friday.

That’s within the spitting range of Amazon, which is worth $1.26 trillion. Nvidia CFO Colette Kress called the launch of ChatGPT a new “iPhone moment” — comparing it to the time when the world realized that mobile phones would completely change how people use computers.

“What can we say other than ‘Wow! “We’ve simply never seen a cadence like this… we’ve never seen it.” Moses said that big corporations and startups alike are “clamoring” to buy Nvidia products.

Technology stocks rose across the board, a Elevator back to growth After analysts declared that the 10-year bull market was finally over. In 2022, the Nasdaq 100, the stock market index dominated by the largest tech companies, will lose an entire third of its value, dropping 33 percent in a massive erasure of the wealth that has accumulated over the past decade. So far in 2023, the Nasdaq 100 is already up 31 percent.

Even Meta, which changed its name from Facebook to indicate its commitment to metaverse, or virtual reality technology, has been pushing AI among its workers to the point where some asked at a company meeting if it was a metaverse. Still a priority. Amazon executives have it Reassure their employees The company is working on major AI initiatives as well.

The startup ecosystem is returning optimism, too, at least for those who focus on artificial intelligence.

“Venture capital firms are vying for access to AI hot deals while shunning traditional, unprofitable software companies,” said Brendan Burke, an analyst at PitchBook. “AI startups face founder-friendly conditions that don’t extend to the rest of the tech ecosystem.”

About $12.5 billion in investments have gone to AI startups this year so far, Burke said, compared to just $4.5 billion invested in the field in all of 2022.

Suvrat Bhooshan, former AI researcher at Meta and founder and CEO of Gan.ai, a startup that lets people automatically create personalized videos of themselves, just raised $5.25 million from investors including Sequoia Capital and Emergent Ventures. The deal came together quickly, Buchan said, with some investors giving him full terms of reference just a week after the initial introductions.

Bhooshan said he’s not the only former Big Tech AI worker who left to start his own company. In the past two years, he said, three or four of the seven people on his team have left Mita to do their own thing. The same thing is happening across the industry, which shows the willingness of AI workers to take advantage of the boom in venture capital to start their own companies.

“The entire Transformers team left Google to start their own company,” Buchan said, referring to the Google researchers who wrote a paper on “Transformers,” a key aspect of the current crop of generative AI.

The optimism in the AI ​​sector contrasts with the massive layoffs that have rocked the industry for months. Thousands of tech workers are still out of work huge wave of layoffs that have passed through dozens of startups, as well as Microsoft, Amazon, Facebook and Google over the past year. High interest rates, which rattled tech companies who used to borrow huge sums to fund their ever-increasing growth, have not gone away.

And things outside of AI can still be bleak. The number of deals and evaluations that startups were scoring outside of AI continued to decline during the start of the year, with the average evaluation of late-stage startups down 40 percent from the same period last year, according to PitchBook.

Employees at Google and elsewhere worry about more layoffs. Silicon Valley bank collapse It spooked tech investors and made it difficult for startups to get the debt they needed to start their businesses.

Home prices are slowly falling in San Francisco, and the commercial rental market is in crisis, showing the overall impact on the economy.

AI won’t change that overnight, said Wang, a business professor at Columbia University.

“It’s really exciting,” he said. “But it’s really hard to say that’s the kind of thing that’s going to drive the upside into a bull market.”