AI reshapes reality: Profits may lag, but change is here

OpenAI hit a revenue milestone of $2 billion in December 2023. Others like Microsoft and Alphabet too are reporting booming sales from their AI products. Even Indian market leader TCS claims it is developing AI and generative AI projects worth $900 million. The AI market is expected to be around $826 billion by 2030.

Rarely has anything excited human intelligence more than the promise of artificial intelligence (AI). The last one year has seen the excitement reach feverish pitch as AI emerges from the realm of research and enters the real world. As the Stanford University’s Institute for Human-Centered AI’s Artificial Intelligence Index Report 2024 notes, “A decade ago, the best AI systems in the world were unable to classify objects in images at a human level. AI struggled with language comprehension and could not solve math problems. Today, AI systems routinely exceed human performance on standard benchmarks.”

The world’s biggest technology companies are stepping up to stake their claims with products that harness this technology. In a signed piece for India Today magazine, Google CEO Sundar Pichai wrote: “There is no doubt in my mind that AI will be the biggest shift we experience in our lifetimes”, a view shared by Wall Street analysts who have likened its possible impact on the world to that of electricity.

In the past three decades of the technology revolution, the browser, search, cloud computing and metaverse have all raised hopes of similar transformations but AI and large language models (LLM) have generated the kind of expectations rarely seen before. Estimates say that the market for LLMs will grow from $6.4 billion in 2024 to $36.1 billion by 2030 at a compound annual growth rate (CAGR) of a massive 33 percent. The AI market, in turn, will be $826 billion by 2030.

According to PwC’s 27th Annual Global CEO Survey, most US chief executives say this will be the year that they reap returns on their investments in GenAI, with 61 percent expecting it to improve the quality of their products and services. There is also a clear bottomline expectation with 44 percent of the CEOs saying they see GenAI providing a net increase in profits in the next 12 months.

Yet, when OpenAI CEO Sam Altman, the man hailed as the high priest of AI, was asked if he is going to monetise ChatGPT, his answer was short and brutal: "The honest answer is, we have no idea." For good measure he added, "We never made any revenue. We have no current plans to make any revenue. We have no idea how we may one day generate revenue." Altman is no tech innocent, disconnected from the real world of hard cash. For nearly 10 years he was closely involved with YCombinator, the world’s best known and most successful startup accelerator. So part of what he said may just have been grandstanding.

In any case, a year from when he made his famous statement, OpenAI hit a revenue milestone of $2 billion in December 2023. Others like Microsoft and Alphabet too are reporting booming sales from their AI products. Accenture, a provider of IT consulting and services to companies, bagged generative artificial intelligence (GenAI) projects worth over a billion dollars in just two quarters. Even Indian market leader TCS claims it is developing AI and generative AI projects worth $900 million.

Which is why funding is no problem for anyone with an AI project in the lab. According to CB Insights, in 2023, AI startups raised $42.5 billion with Generative AI alone attracting 48 percent of that.

Profits, though, are not yet visible. Given the investments that are currently pouring into AI and related areas, the returns are puny. For all the revenues OpenAI has generated, it needs tens of billions of dollars more to fund its plans for constructing a modern manufacturing facility. Both Alphabet and Microsoft have in recent months faced irate investors concerned at the mounting costs of AI developments for their products. On ground, too, AI hasn’t been the game changer these large companies had hoped for. Thus, last year Microsoft incorporated AI into its Bing search engine with the promise of grabbing market share from its rival Google. After all the effort, its market share in search grew by less than half a percent and Google continues to be the runaway market leader.

These may be minor pinpricks. As the Stanford report quoted above says, AI is increasingly being utilized to propel medical advancements marked by the arrival of highly knowledgeable medical AI. With the US Food and Drug Administration (FDA) approving more and more AI-related medical devices, its contribution goes beyond mere bottom-line expansions for companies. That more than anything else, justifies the hype around it.