Analyst Take: The highlight of this quarter was the EU AI Act. This can be deemed a proactive step toward AI governance, balancing innovation and ethics. It will likely be a global benchmark for AI regulation and promote ethical AI practices. The Act will come into force by mid-2024, with enforcement over 2025–2026. For non-compliance, fines as high as USD 38 million or 7% of a company's global revenue will be imposed.
Analyst Take: During Q1 2024, the GenAI ecosystem grew substantially, securing USD 6.5 billion in funding. This was a 59.0% increase from the previous quarter and represents the highest funding raised within a quarter since 2021. Major funding rounds from industry giants like Amazon/Anthropic and startups like Moonshot AI highlighted the willingness of investors to commit significant resources to promising AI ventures. Seed and early-stage funding rounds accounting for 84.0% suggests a healthy pipeline of emerging startups and ongoing innovation, which should help to sustain the funding momentum for the GenAI sector.
Analyst Take: Repeat rounds, such as in the case of Anthropic, indicate sustained investor interest and a push to strengthen expertise and product deployment in GenAI during the past 12 months.
Analyst Take: Several new models aimed at competing with OpenAI's GPT-4 were launched this quarter. Mistral AI introduced Mistral Large, while Chinese player Baichuan unveiled Baichuan 3, claiming superiority in processing tasks in the Chinese language. Inflection AI launched Inflection 2.5, boasting efficiency, using only 40% of OpenAI's computing power. Google's new model, Google Ultra, purportedly edged past GPT-4, while Anthropic's Claude 3 Opus model claimed superiority over GPT-4 and Google Ultra. Despite these, OpenAI remains determined, reportedly gearing up for a mid-year release of its next model, GPT-5. OpenAI has also reduced API access pricing and introduced new model versions, demonstrating its commitment to maintaining market dominance.
Analyst Take: While maintaining its market dominance, NVIDIA introduced several chips to compete with industry rivals AMD and Intel. The standout among them is the Blackwell B200 GPU touted as the “world’s most powerful chip” for AI. Concurrently, Meta joined the ranks of customers venturing into chip development, following in the footsteps of Microsoft and Google, who launched their own chips last quarter, intensifying competition. With increasing demand for GenAI applications, AI chips are poised to become the next major arena for competition in the race for AI dominance.
Analyst Take: GenAI chatbots have evolved to become essential tools across various industries, with advancements in multimodal systems, where these chatbots can comprehend language, visuals, and voice inputs. The focus is now shifting toward enhancing the accuracy and personalization of responses. For instance, Google upgraded its chatbot with a more robust underlying model, while OpenAI introduced a memory feature and a GPT Store to facilitate the creation of customized bots.
Analyst Take: A trend of incorporating FMs into smartphones seems to be gaining momentum. Samsung, for instance, partnered with Google Cloud to incorporate models available on Vertex AI cloud, such as Gemini Pro and Imagen 2, offering a range of capabilities from creating summaries to photo editing. Additionally, the Gemini Nano model will support Google Messages' "Magic Compose" feature, enabling the drafting of messages even without internet connectivity through on-device processing. While most partnerships reported during the quarter focused on cloud processing, Google also collaborated with MediaTek to use the Gemini Nano model in developing chips to enable AI features on mid-range phones. This potentially signals a shift toward integrating FMs directly into AI chips, underscored by the emergence of SLMs that can run chips.
Analyst Take: 11 M&A deals were reported compared with four in the previous quarter. Most acquisitions were in the infrastructure space, with Databricks reporting two during the quarter. Companies are gradually expanding their offerings through acquisitions in the GenAI applications space, particularly in marketing content generation. The FMs space is yet to see M&As.
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