Artificial intelligence continues to captivate investors worldwide as businesses rake in millions of dollars in 2023

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In H1 2023, artificial intelligence dominated the tech space, with billions of dollars getting invested in the sector. An increasing number of businesses, especially in the tech space, are prioritizing the development of artificial intelligence (AI) over all other digital technologies. Tech giants like Google, Microsoft, and Meta are all betting on AI projects to drive revenue growth for their businesses.

Microsoft marked a significant move in the AI market in January 2023, when the firm made an investment of US$10 billion in OpenAI, the name behind ChatGPT. Through the investment in OpenAI, the firm is taking on Google in the search engine space, as it has integrated the ChatGPT technology into Bing. Further building on its AI investment, Microsoft invested an undisclosed amount in an India-based startup Builder.ai in May 2023. The two firms are expected to collaborate on the development of AI-powered tools, enabling Microsoft to compete with Google.

Following the footsteps of Microsoft, Google also made a bigger push in the AI space, when the firm infused US$300 million in OpenAI competitor Anthropic in February 2023. For years, Google has been at the forefront of the technological revolution, and the investment in Anthropic is part of the firm's strategy to maintain its technological prowess through strategic collaborations in the sector.

Meta, which increasingly invested in the development of virtual worlds, is now focusing more of its efforts in the AI segment. The investment in the metaverse has resulted in huge losses for the firms, resulting in increased scrutiny from investors and shareholders, who are demanding better strategic moves. In 2023, Meta is expected to significantly invest in AI to drive its revenue growth. The firm, in May 2023, announced a series of new technologies, including an in-house chip for training AI faster and a tool for developers that will enable them to build faster and more efficiently.

This strategic approach adopted by Microsoft, Google, and Meta is a clear indication that big tech players are foreseeing AI as the next growth driver for their businesses over the next five years. While these big tech firms are investing billions of dollars in the development of their AI technology, they have also continued to invest in innovative startups in the space in H1 2023.

• Microsoft, which invested in OpenAI and Builder.ai, also participated in the US$1.3 billion investment round raised by Inflection AI in June 2023. Alongside Microsoft, Redi Hoffman, Bill Gates, Eric Schmidt, and Nvidia also participated in the funding round, which values Inflection AI at US$4 billion.

Inflection AI, in partnership with CoreWeave and Nvidia, is working on the development of the largest AI cluster worldwide. The firm has also created large language models enabling people to interact with its chatbot called Pi. This means that the firm is competing with the likes of OpenAI and Google in the generative AI space.

Cohere, another OpenAI competitor, announced that the firm had raised US$270 million in a fundraising round in June 2023. The capital infusion was led by Nvidia, Oracle, and Salesforce Ventures. Being the premier AI chip maker, the investment in Inflection AI and Cohere is part of the firm’s strategy to further strengthen its position in the segment over the next three to four years.

Other AI-focused startups like Reka, Mistral AI, and Instawork have also raised multi-million dollars in investment from individual investors and venture capital and private equity firms in H1 2023.

• Reka, for instance, announced that the firm had raised US$50 million in a funding round in June 2023. The investment round was led by DST Global Partners and Snowflake. Innovative AI startups are focused on the development of large and specialized AI models for enterprise customers. Reka is expected to use the capital to acquire computing power from Nvidia and to build a business team.
• Mistral AI, the Paris-based AI startup, raised €105 million in a seed funding round in June 2023. Mistral AI happened to be only four weeks old at the time of fundraising and yet raised the largest seed round in Europe. This shows the growing interest that venture capital and individual investors have in the AI space. The firm is yet to launch its first product, but it is expected to launch a large language model, similar to that of OpenAI. Lightspeed Venture Partners, Snapchat, Epic Games, and Stability AI participated in the investment round.
• Instawork, an AI and staffing-focused startup in the United States, announced that the firm had raised US$60 million as part of its Series D round in May 2023. TCV led the Series D round, which also included participation from investors like Benchmark, Spark Capital, and Greylock. The firm is planning to use the capital to expand the use of AI and machine learning in its operations. With the Series D round, the firm had raised a total of US$160 million and values Instawork at US$760 million.

The investment frenzy in the AI sector is expected to further continue in H2 2023. Tenstorrent, an AI-chip firm, announced that the firm had raised US$100 million in an investment round from Hyundai, Kia, and Samsung. Other investors like Fidelity Ventures, Eclipse Ventures, Maverick Capital, and Epiq Capital also participated in the investment round. The Canadian firm, which raised the funding in August 2023, is looking to compete with Nvidia.

Nomic, another AI startup based in the United States, raised US$17 million in a funding round led by Coatue in July 2023. The investment round has valued the firm at US$100 million and shows that venture capital firms have continued to bet on small teams with popular AI products. The firm, to date, has launched two products including an open-source AI model.

The trend is expected to further continue from the short to medium-term perspective in the global market, thereby supporting the accelerated growth trajectory of the artificial intelligence market over the next three to four years. Overall, TechInsight360 maintains a robust growth outlook for the AI market, with innovation and a competitive landscape projected to be the growth driver for the industry.