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In today’s newsletter:

• A year of plateau and new directions for AI
• Digital transformation deals drive IT recovery
• Aye Finance files draft papers for IPO

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As 2024 draws to a close, the AI landscape finds itself at a crossroads. 

From GPT-3.5 to GPT-4, the tech world was abuzz with excitement. But as we close the chapter on this groundbreaking year, a new reality emerges: the AI landscape is hitting a plateau.

For years, the mantra of the AI industry was "bigger is better." 

• By throwing more data and computing power at AI models, researchers believed they could unlock superhuman intelligence 

However, recent developments suggest that this approach is reaching its limits.

• OpenAI, at the forefront of this scaling race, is now rethinking its strategy

• Ilya Sutskever, a key figure in the AI community, acknowledges that the era of scaling is waning

• Sutskever believes that the focus is shifting towards a new era of "wonder and discovery"

As AI models grow, so does the need for high-quality, human-made data. 

• The internet alone can no longer supply the diverse, specialised datasets that are needed to train the next generation of AI systems 

This has led companies like OpenAI to form partnerships with publishers and other organisations to acquire data—an expensive and time-consuming process.

Training cutting-edge AI models is an incredibly expensive endeavour. 

• The cost of developing models like GPT-4 and Google's Gemini runs into the millions, if not billions, of dollars. As models grow larger, so do the costs

In the years ahead, AI will likely evolve away from simple model scaling and toward more nuanced forms of growth. 

• OpenAI has already shifted its focus from just building larger models to creating AI “agents”—intelligent systems that can take on more complex, real-world tasks

Google’s Sundar Pichai has already hinted that the low-hanging fruit in AI research has been plucked, and the future will demand deeper, more profound innovations.

As we say goodbye to 2024, one thing is clear: the AI race is far from over. 

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Picture credit: Microsoft Copilot

IT companies are seeing slow but steady recovery in discretionary spending by clients.

• Digital transformation deals are expected to see a 10 percentage point increase YoY by FY25 end, according to UnearthInsight’s data

Digital transformation deals involve the large-scale modernisation of outdated legacy tech backends in enterprises.

The top four Indian IT services companies including TCS, Infosys, HCLTech and Wipro together won 18 digital transformation deals in the last 7-8 months of FY25.

• These transformation deals are replacing cost optimisation deals, which had become the trend for deal wins in the past several quarters
  
  
• In the last two years, companies tightened discretionary spending budgets amidst macro uncertainties and inflationary pressures

Industry experts, however, called these transformation deals early green shoots of growth and not full fledged recovery yet.

• In fact, in the current quarter, there haven’t been too many transformation deals. This is expected to change in Q4

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India's IPO market continues to heat up as more companies look to go public!

Aye Finance, a non-banking financial company (NBFC) catering to micro, small, and medium enterprises (MSMEs), has filed preliminary papers for an initial public offering (IPO) to raise Rs 1,450 crore.

• The IPO comprises a fresh issuance of equity shares worth Rs 885 crore and an offer-for-sale of Rs 565 crore by existing shareholders, as we exclusively reported previously
  

A91 Emerging Fund, Alpha Wave India, Alphabet (CapitalG International, and CapitalG LP), LGT Capital, MAJ Invest Financial, Harleen Kaur Jetley, and Vikram Jetley are the selling shareholders.

• Axis Capital, IIFL Capital Services, JM Financial, and Nuvama Wealth Management are appointed as the book running lead managers

Before launching the IPO, Aye Finance may raise Rs 177 crore via pre-IPO placements. This amount, if completed, will reduce the size of the fresh equity issuance in the IPO.

Aye Finance recorded 291.5% growth in profit for the fiscal 2024 at Rs 171.7 crore, up significantly from Rs 43.8 crore in the previous fiscal.

• Net interest income grew by 68.8% to Rs 622.2 crore, compared to Rs 368.5 crore during the same period

Find out more

From Deepika Padukone to Alia Bhatt, the leading ladies of Bollywood stole the show last year, but off-screen, the number of women in charge still remains low.

• Representation of women as commissioning in-charge fell last year versus 2022 for movies and series

While departments like direction and production design saw a marginal increase in women heading these roles, there's still a significant gap.

• A glimmer of hope lies in Hindi language projects, which saw an increase in women holding top positions last year

Dig deeper

• Infosys launched a Google Cloud centre of excellence to accelerate enterprise AI innovation through Generative AI.
  
  
• The UK government has launched a consultation to establish clearer regulations on how tech companies use copyrighted content to train AI models.

Orbital Lasers, a Japanese startup, and InspeCity, an Indian robotics firm, are teaming up to clean up the orbital neighbourhood. 

• Their secret weapon? Lasers!

The two companies plan to test this laser tech in space as early as 2027. 

Find out more

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