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The Dynamic Growth and Impact of Generative AI in 2024

GOOVER DAILY REPORT September 13, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Market Growth and Trends in Generative AI
  3. Generative AI Startups and Investment Landscape
  4. Global Investment Trends
  5. Key Players and Competitive Edge
  6. Shift Toward Application-Layer Startups

1. Summary

  • The report titled 'The Dynamic Growth and Impact of Generative AI in 2024' explores the rapid expansion and transformative nature of generative AI. It highlights significant market growth, extensive adoption rates, and substantial investment trends. The generative AI market, currently valued at $44.89 billion, is projected to reach $66 billion by the end of 2024 with adoption rates among Fortune 500 companies at 92%. The report identifies key players like OpenAI, Nvidia, and key sectors poised for major growth, such as advertising, healthcare, and education. Furthermore, it emphasizes the shift in investor interest towards application-layer startups over foundational models, indicating a maturing market focused on impactful AI applications.

2. Market Growth and Trends in Generative AI

  • 2-1. Market valuation and growth projections

  • The global generative AI market is currently valued at $44.89 billion, which represents a substantial increase from $29 billion in 2022, reflecting a remarkable growth rate of 54.7% from 2022 to 2024. Predictions indicate that the market value could exceed $66 billion by the end of 2024, with the majority of growth driven by the United States, the largest individual market, projected to surpass $23 billion. Overall, the generative AI market could reach a valuation of $1.3 trillion by 2032.

  • 2-2. Adoption rates among Fortune 500 firms and Gen Z

  • Adoption rates of generative AI among Fortune 500 firms stand at an impressive 92%, indicating a significant level of acceptance and integration of this technology at the highest levels of business. Additionally, among younger demographics, 70% of Gen Z individuals have reported trying generative AI tools. This suggests a high engagement with generative AI within the younger generation compared to older demographic groups.

  • 2-3. Impact on the job market

  • The influence of generative AI on the job market could be profound, with estimates suggesting that nearly 9 out of 10 American jobs may be impacted by generative AI technologies. Notably, while it is anticipated that 85 million jobs could be rendered obsolete by 2025 due to automation, there may also be the creation of approximately 97 million new jobs in the same timeframe, resulting in a net gain of about 12 million jobs. The Bureau of Labor Statistics further reports that almost 10% of jobs could be at high risk of replacement by generative AI by 2029.

3. Generative AI Startups and Investment Landscape

  • 3-1. Number of generative AI startups and projected growth

  • As of early 2024, there are approximately 67,200 generative AI firms operating worldwide. This marks an increase from around 50,000 companies at the end of 2023, demonstrating a growing interest in generative AI technology. If current trends persist, the number of generative AI startups may reach up to 100,000 globally by the end of 2024.

  • 3-2. Annual growth rate forecast

  • The market for generative AI is expected to grow annually at a rate of 37.3% from 2024 to 2030. Additionally, the total market size for generative AI solutions is predicted to reach $51.8 billion by 2028, with a compound annual growth rate (CAGR) of 35.6% between 2023 and 2028.

  • 3-3. Sector-specific applications and investor interest

  • Generative AI is being increasingly integrated across various sectors, including advertising, automotive, education, fashion, healthcare, legal, and manufacturing. For example, in advertising, AI tools enhance content creation and targeted marketing, while in healthcare, they are used to speed up drug discovery and research processes. Investor interest is notably shifting from foundational model companies to application-layer startups, as evidenced by S&P Global data showing that eight out of the ten largest generative AI deals in Q1 2024 were allocated to companies developing applications using third-party foundation models.

  • 3-4. Leading startups and funding details

  • Several key startups are emerging in the generative AI landscape as strong contenders for investment and growth. OpenAI and Anthropic are prominent players, with OpenAI having secured a total of $11.3 billion in funding. Other notable companies include Perplexity AI, which specializes in search engine technology and acquired $63 million in April 2024, and Glean Technologies, which raised about $200 million in a Series D funding round valued at $2.2 billion. Startups focusing on applications are attracting significant attention, especially in light of the shifts in investor preferences toward tailored, application-based solutions.

4. Global Investment Trends

  • 4-1. Investment figures for Q1 2024 and projections

  • In the first quarter of 2024, global venture capital investment in Generative AI reached $3 billion. It is forecasted that total global investment for the year will reach approximately $12 billion. This forecast reflects a continuing trend from previous years, where significant investments have been made in the sector.

  • 4-2. Key investments from major tech companies

  • The total investment in Generative AI for the year 2023 was $21.3 billion, largely driven by three substantial investments: OpenAI received $10 billion from Microsoft, Anthropic garnered $4 billion from Amazon, and Inflection secured $1.3 billion from Microsoft. These mega investments underscore the keen interest of major tech companies in the Generative AI landscape.

  • 4-3. Regional investment analysis (North America and Europe)

  • North America has been the predominant region for Generative AI investments, accounting for the overwhelming majority of the total investment to date. Meanwhile, Europe, particularly Ireland, is increasingly viewed as a significant opportunity in this rapidly evolving market. Investors are starting to diversify their portfolios by looking into European startups to uncover promising investment opportunities.

  • 4-4. Shift from horizontal to vertical AI investments

  • There is an ongoing shift in focus from horizontal AI, which encompasses general purpose applications such as Large Language Models (LLMs), to vertical AI, which concentrates on specific and niche applications. This trend indicates a maturing market as investors are increasingly seeking opportunities in specialized sectors, leading to a projected increase in the number of deals and overall investment in the coming years.

5. Key Players and Competitive Edge

  • 5-1. Key GPU manufacturers and their roles

  • The report identifies key GPU manufacturers as pivotal in the generative AI sector. Companies such as Nvidia, Advanced Micro Devices (AMD), and Intel serve as the backbone for artificial intelligence models, which require substantial computing power. Nvidia, in particular, is highlighted as a leader in the GPU market, with its theoretical performance improving at an average rate of about 50% per generation. Upcoming GPU launches are expected to significantly enhance performance, benefiting generative AI applications. Nvidia's A100 and the anticipated H100 GPUs are designed to deliver increased throughput, which is essential for training generative AI models.

  • 5-2. Companies with extensive data access

  • Companies such as Google, Amazon, and Microsoft are recognized for their access to vast amounts of high-quality data, which is critical for generative AI. These firms have established capabilities in AI and machine learning since as early as 2014, allowing them to leverage their data effectively. Their continued investment in AI and successful commercialization of AI technologies position them as prime candidates for growth within the generative AI landscape.

  • 5-3. Firms with top technical talent

  • The report states that access to top technical talent is crucial for the success of generative AI. Companies like OpenAI, IBM, and Baidu are noted for their significant investments in AI and have developed deep pools of talent necessary for implementing complex AI models. The importance of hiring top talent is underscored by research indicating that organizations seeing significant returns from AI are likely to have invested in skilled personnel.

  • 5-4. Potential winners in the evolving landscape

  • The evolving landscape of generative AI presents opportunities for various companies to emerge as winners. Key players identified include firms that offer cutting-edge hardware, those with substantial data access, and organizations with top technical talent. The report suggests that as generative AI continues to develop, investors should keep an eye on these categories of companies to identify potential growth opportunities.

6. Shift Toward Application-Layer Startups

  • 6-1. Investor Interest in Application-Layer Startups

  • Investor interest has increasingly shifted from foundational model companies to application-layer startups in the generative AI landscape. The significant funding and investor attention now favor those developing applications that leverage existing foundational models, indicating a transformative change in market focus.

  • 6-2. Comparative Investment Trends: Foundational Models vs. Applications

  • While the top nine pure-play foundational model companies, such as Anthropic, Cohere AI, and OpenAI, collectively secured $28.67 billion in disclosed funding, investor excitement towards these firms has waned since late 2023. This trend is characterized by a decline in general interest due to the strong market position held by established players like OpenAI, Google, Microsoft, and Anthropic.

  • 6-3. Market Saturation and Higher Capital Investment

  • The foundational model sector necessitates substantial capital investments, yet the anticipated growth in demand for these models is not expected to counterbalance the increasing costs and profit pressures. Moreover, the presence of open-source alternatives adds to the competitive landscape, affecting profitability.

  • 6-4. Consumer Expectations and Demands for AI Applications

  • Consumer demands have evolved, requiring tailored models that provide specific business advantages rather than generic solutions. This change has fueled interest in application-layer startups, which create more targeted products, appealing to defined market segments. The majority of significant funding in the early part of 2024 has been directed towards these application-focused companies, signaling a mature market that responds to actual business needs.

7. Glossary

  • 7-1. Generative AI [Technology]

  • Generative AI refers to artificial intelligence systems capable of generating new content, such as text, images, and music, based on learned patterns. It plays a crucial role in transforming industries by enhancing productivity, creating new job roles, and driving innovation in applications from advertising to healthcare.

  • 7-2. OpenAI [Company]

  • OpenAI is a leading AI research organization known for developing advanced generative AI models like GPT-3. With significant funding and technical talent, it remains a key player in the generative AI landscape, driving innovation and attracting substantial investments.

  • 7-3. Foundational Models [Technology]

  • Foundational models are large-scale AI systems trained on vast datasets, serving as the base for various AI applications. Companies like OpenAI and Anthropic develop these models, which are crucial in building sophisticated, versatile AI solutions.

  • 7-4. Nvidia [Company]

  • Nvidia is a technology company renowned for its GPU manufacturing, essential for processing large data sets in generative AI. It stands out as a significant player, capitalizing on the growing demand for AI hardware.

8. Source Documents