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The Current State and Economic Impact of Generative AI in 2024

GOOVER DAILY REPORT September 10, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Market Valuation and Growth of Generative AI
  3. Investment and Venture Capital Trends
  4. Generative AI Startups and Adoption Across Industries
  5. Technological Beneficiaries of Generative AI
  6. Conclusion

1. Summary

  • The report titled 'The Current State and Economic Impact of Generative AI in 2024' offers a comprehensive analysis of generative AI's market valuation, adoption rates among Fortune 500 companies, and expected job market dynamics. It reveals the market's substantial growth, with a global valuation of $44.89 billion, and highlights that 92% of Fortune 500 companies have integrated generative AI into their operations. The economic impact includes the potential displacement of 85 million jobs but also the creation of 97 million new positions by 2025. Additionally, the report examines venture capital trends, showcasing significant investment in generative AI, particularly in North America, and a shift from foundational models to application-layer startups. It also covers the proliferation of generative AI startups and their sector-specific applications, from healthcare to education, emphasizing key companies like OpenAI and Nvidia that benefit from this technological boom.

2. Market Valuation and Growth of Generative AI

  • 2-1. Current market valuation and growth rate

  • As of 2024, the global generative AI market is valued at approximately $44.89 billion, marking a significant increase from $29 billion in 2022. This represents a growth rate of 54.7% over the two-year period. Furthermore, the market is projected to exceed $66 billion by the end of 2024, with substantial growth driven by the United States, which is expected to surpass $23 billion by year's end.

  • 2-2. Adoption rates among Fortune 500 companies

  • The adoption of generative AI among Fortune 500 companies is notably high, with 92% of these firms reported to have integrated generative AI into their operations. This widespread adoption underscores the technology's relevance and importance within major corporations across various sectors.

  • 2-3. Projected economic impact and job market shifts

  • Generative AI is projected to influence the economic landscape significantly, potentially impacting the global economy by up to $7.9 trillion annually. The technology may affect nearly 90% of American jobs. While it is estimated that generative AI might lead to the displacement of about 85 million jobs by 2025, it is anticipated that approximately 97 million new jobs could also be created in the process, highlighting a net positive job growth potential.

3. Investment and Venture Capital Trends

  • 3-1. Global venture capital investment in Generative AI

  • According to a report by EY Ireland, global venture capital investment in Generative AI reached USD 3 billion in the first quarter of 2024 and is forecasted to reach USD 12 billion for the entire year. The total investment for Generative AI in 2023 was USD 21.3 billion, a significant increase from previous years. This total was supported by major investments, notably USD 10 billion from OpenAI-Microsoft, USD 4 billion from Anthropic-Amazon, and USD 1.3 billion from Inflection-Microsoft. The majority of these investments were concentrated in North America, indicating a significant opportunity for growth in regions like Ireland and Europe.

  • 3-2. Key contributors and investment distribution

  • The report emphasizes that while North America has been the predominant region for Generative AI investments, Europe has the potential to be a significant player, especially with Ireland's favorable technology and business climate. Companies like OpenAI, Anthropic, and others have received substantial funding, which has driven innovation and market growth across various sectors, including healthcare, natural language processing, and vertical applications. Despite the global slowdown in investment in other sectors, funding towards Generative AI has shown impressive growth, suggesting a robust future for this industry.

  • 3-3. Shift from foundational models to application-layer startups

  • There has been a notable shift in investor interest from foundational model companies that have traditionally led the space to startups that are developing applications on top of these models. Reports indicate that the top nine foundational model companies have attracted a total of USD 28.67 billion in funding. However, as of late 2023, investor focus has begun to pivot towards application-layer startups. In the first quarter of 2024, eight out of ten of the largest generative AI deals involved companies specializing in application development. This shift underscores an increasing demand for tailored AI solutions and signals a maturing phase in the overall AI market.

4. Generative AI Startups and Adoption Across Industries

  • 4-1. Number of startups and industry adoption

  • As of 2024, there are approximately 67,200 generative AI startups worldwide, a significant increase from around 50,000 in December 2023. It is projected that, if trends continue, this number may reach 100,000 globally. Notably, 25% of these startups are based in the United States. The demand for generative AI technology is evident, with a total investment estimated at $16 billion in 2023, expected to rise to $143 billion by 2027. The market is predicted to grow at an annual rate of 37.3% from 2024 to 2030, contributing an annual value of up to $4.4 trillion.

  • 4-2. Main industries utilizing generative AI

  • Generative AI has been adopted across various sectors with notable impact. In advertising, it has improved email conversion and revenue by 41%. The automotive industry utilizes it for design optimization, leading to a 30% reduction in greenhouse gas emissions. In education, generative AI contributes to personalized learning materials, boosting test scores by 62%. The fashion industry employs it for trend prediction and design creation, while healthcare uses it to accelerate drug development and research data analysis, reducing production time by 25%. Legal firms leverage generative AI for document analysis, with 30% reporting improved productivity, and manufacturing companies rely on it for optimizing product designs.

  • 4-3. Key companies and their contributions

  • Prominent generative AI startups include OpenAI, Anthropic, Hugging Face, Perplexity AI, AI21 Labs, Glean, and Jasper. OpenAI, known for its product Sora, has received $11.3 billion in funding and employs 770 individuals. Anthropic, with its Claude chatbot, has secured $4.1 billion and focuses on responsible AI development. Hugging Face, although not solely dedicated to generative AI, contributes significantly through its open-source projects. Other noteworthy companies include Glean, specializing in data search for Fortune 50 clients, and Jasper, which creates brand-consistent marketing content utilizing generative AI capabilities.

5. Technological Beneficiaries of Generative AI

  • 5-1. Companies benefiting from AI hardware and data

  • Companies that manufacture advanced hardware, particularly Graphics Processing Units (GPUs), are positioned to gain significantly from the growth in generative AI. NVIDIA is a key player in this space, noted for its leading position in the GPU market and substantial investments in AI technologies. For instance, NVIDIA's GPUs have shown an average performance improvement of 50% with each generation, highlighting their essential role in the training and operation of generative AI models. Another notable manufacturer is Advanced Micro Devices (AMD), along with Intel, which also plays a significant role in this industry.

  • 5-2. Significant contributors and their competitive advantages

  • Companies with access to large datasets, such as Google, Amazon, and Microsoft, have a significant competitive advantage in the generative AI landscape. These firms possess the technical capabilities and experience needed to leverage vast amounts of data to develop advanced AI models. They began building AI and machine learning capabilities back in 2014, ensuring they have a strategic lead in the ongoing AI race. Their strong investment backgrounds and access to top talent further solidify their positions as leading innovators in this space.

  • 5-3. Investment opportunities in technical talent and innovation

  • Investors should focus on companies that have a strong pool of technical talent necessary for the successful development and implementation of generative AI. Companies like OpenAI, IBM, and Baidu are distinguished for their significant investments in AI and the availability of highly skilled professionals in the field. According to a survey by McKinsey, organizations that hire top AI talent are much more likely to see substantial bottom-line impacts from AI adoption. This indicates a promising investment landscape focused on companies that prioritize acquiring and retaining top technical talent.

6. Conclusion

  • The 2024 landscape of generative AI demonstrates not only significant growth in market valuation but also a high adoption rate among major corporations, such as Fortune 500 companies, due to its immense strategic value. The transformative impact of generative AI on the job market, with a net positive job growth potential, indicates a profound shift in workforce dynamics. Investment trends show a notable pivot towards application-layer startups, which are increasingly valuable for their tailored AI solutions. Key technological beneficiaries, including hardware manufacturers like Nvidia and data-centric companies such as OpenAI, underscore the critical role of advanced technology and big data in this sector. While the report highlights a promising future for generative AI, it also acknowledges the necessity of continuous monitoring and adaptation to address emerging challenges and capitalize on new opportunities. Future prospects involve further market growth and increased investments in technical talent and innovation, ensuring that generative AI remains a pivotal force in the digital economy.

7. Glossary

  • 7-1. Generative AI [Technology]

  • Generative AI refers to artificial intelligence systems capable of generating new content, such as text, images, or music, based on existing data. As of 2024, it has seen substantial adoption across various industries, offering significant productivity improvements and economic benefits.

  • 7-2. Fortune 500 Companies [Company]

  • A list of the 500 largest companies in the United States, based on total revenue. In 2024, 92% of these companies are utilizing generative AI for various strategic operations, highlighting its widespread acceptance and importance in the business world.

  • 7-3. OpenAI [Company]

  • A leading company in the generative AI space, known for developing models such as GPT-3.6 and GPT-4.0. It is a key player in advancing AI technology and attracting significant venture capital investment.

  • 7-4. Nvidia [Company]

  • A prominent GPU manufacturer that provides the necessary hardware for training AI models. Nvidia's products are critical for the computational needs of generative AI, making it a significant technological beneficiary.

8. Source Documents