What you need to know
- A new study suggests that 30% of investors will withdraw from AI projects by 2025 after proof of concept.
- A separate study also indicated that AI is just hype, and few people use tools like ChatGPT and Microsoft Copilot.
- The study suggests that top executives struggle to identify a profitable path despite their hefty investment in the landscape.
As a seasoned analyst with over two decades of experience in the tech industry, I have witnessed the rise and fall of numerous technological trends. The current state of AI, particularly generative AI, is reminiscent of the dot-com bubble of the late ’90s – high expectations, significant investments, but uncertain returns.
Generative AI is widely used by tech industry leaders such as Microsoft and Google. However, this advanced technology encounters several hurdles that limit its optimal performance. Among these challenges are substantial operational expenses, significant energy and water usage, and other related issues.
As a researcher studying the latest trends in artificial intelligence (AI), I recently came across an intriguing finding. Earlier this year, a report emerged questioning the staying power of AI, implying that tools like ChatGPT and Microsoft Copilot are not widely adopted. Now, Gartner’s new report forecasts that at least 30% of generative AI (GenAI) projects will be abandoned by the end of 2025. The reasons behind this prediction include issues with data quality, insufficient safeguards to prevent unintended consequences, and high operational costs without a clear path to profitability.
It’s been rumored that OpenAI, the company behind ChatGPT, is facing financial instability, with potential losses estimated at around $5 billion over the next year. To stay in operation, they may require additional investment from their backers and shareholders.
According to Gartner’s VP Analyst, Rita Sallam:
Following the widespread excitement about GenAI last year, executives are eagerly awaiting tangible outcomes from their investments. However, many organizations are finding it challenging to demonstrate and capitalize on these returns. As the breadth of initiatives expands, the fiscal strain associated with creating and implementing GenAI models is becoming more pronounced.
Profits from AI ventures don’t match the hefty investments
According to Gartner’s analysis, major players in the AI sector have encountered difficulties due to the substantial investments required, ranging from $5 million to $20 million, without a clear path towards financial gains. As Sallam pointed out, “Regrettably, the costs associated with GenAI aren’t as consistent or foreseeable as those of other technologies.”
Based on a Gartner report, Artificial Intelligence (AI) necessitates a substantial acceptance for indirect, future financial investments rather than immediate returns on investment (ROI). This is crucial to note as top company executives typically prioritize revenue generation over engaging in risky business endeavors without proper justification.
Based on the results of a Gartner survey, which polled 822 business leaders during the fall of 2023, an average revenue increase of 15.8%, cost savings of 15.2%, and productivity improvement of 22.6% were reported.
Those who have embraced AI technology ahead of the curve are already reaping significant rewards from their strategic investment. In recent times, Microsoft, OpenAI, and NVIDIA have intensely competed for the title of the most influential tech company, with Apple, previously regarded as a latecomer in this domain, also joining the fray due to its newly announced AI initiative — Apple Intelligence.
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2024-07-30 16:39