Is the artificial intelligence market already saturated?
From voice assistants to algorithms that predict global market trends, artificial intelligence (AI) is seeing explosive growth. But as with any new technology, there comes a time when innovation gives way to excess.
In recent months, the rapid expansion of AI tools and solutions has sparked discussions among industry experts and investors. Are we witnessing a golden age of AI, or are we on the verge of an overwhelming market?
The technology landscape is ever-changing, with innovations often outpacing the market's ability to adapt.
Historical technological development
In the year The late 1990s saw the dot-com bubble, a period of optimism surrounding Internet-based companies. Startups with little more than a web presence have received rave reviews, only for many to fail spectacularly when the bubble bursts.
In the year In 2017, the world saw the rise of Initial Coin Offerings (ICOs), a fundraising method where new cryptocurrency projects sell tokens to investors.
This period is marked by great enthusiasm for the potential of blockchain and decentralized technologies. However, excitement often overshadows the practicality and feasibility of many projects.
As a result, investments are limited to real-world applications or, in some cases, ventures that have no real connection to cryptocurrency.
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A notable example was during the 2017 “blockchain branding” trend with a company formerly known as Long Island Iced Tea Corp. The company made soft drinks and had nothing to do with blockchain. In order to capitalize on the blockchain, the company named itself “Long Blockchain Corp.”
Following this rebranding, the company's stock price increased. This increase, despite no change in the business model or operation, highlighted the speculative nature of the market at the time and the lengths to which companies would go to ride the blockchain wave.
However, the enthusiasm was short-lived. According to Bitcoin.com, About half of the 2017 ICO projects were canceled in February 2018.
The impact of AI is beyond imagination
While the dot-com and blockchain bubbles are characterized by speculation and sometimes lack of real value, the AI wave is fundamentally different.
Companies like Microsoft and Google aren't just working in AI — they're integrating it into the products and services millions use every day, revealing real-world applications that are actively reshaping industries.
Michael Koch, co-founder and CEO of HubKonect – an AI platform for local store marketing campaigns – told Cointelegraph:
“Think technologists and people who failed at crypto are now moving on to the next hot technology, so the AI market feels saturated – but in reality, there are real builders and leaders in AI. There needs to be advanced eyes for people to really continue to build and take advantage of the evolution of AI.”
Google's generative AI, Google Bard attracted more than 140 million visitors in May alone, sports teams are getting real-time analytics, and AI chatbots are becoming more time- and cost-effective.
Modern AI gold rush
The fascination with artificial intelligence has led to a proliferation of AI-driven tools, solutions, and startups. According to Precedent Research, the global artificial intelligence market is estimated at $454 billion in 2022 and is predicted to grow to $538 billion in 2023.
Venture capital (VC) remains the largest source of funding for the AI sector in 2023. According to data from Pitchbook, generative AI startups raised more than $1.7 billion in Q1 2023, with an additional $10.7 billion in deals pending.
Among the more notable acquisitions was Google-backed Anthropogenic, which raised $450 million against a reported $5 billion. Builder.AI has raised $250 million. Mistral AI managed to raise $113 million without a product or proof of concept. With the VC injection thrown at these AI startups like wildfire, one might draw parallels with the ICO bust. In that case, there was a lot of hype without any real use cases or proof of feasibility. However, what sets AI apart are the multitude of use cases and real-life examples of success. Take for example ChatGPT, which quickly reached 100 million users in two months, demonstrating the tangible impact of AI.
However, with this rapid growth and high valuations, some feel that the AI market is overheated. Marko Kolanovic, JPMorgan's chief market strategist, believes the AI market is close to saturation. According to Forbes, Kolanovic said the recent market volatility is the result of an “AI-driven bubble” and that the buzz around the technology is not “AI-powered” but “the popularity of chatbots that often fail at basic questions.” Income Growth”
Generative AI company Jean Leif-Nisson Lundbeck, founder and CEO, has the opposite view and believes we are only at the tip of the iceberg. He told Cointelegraph.
“The AI market is nowhere near saturated. Currently, companies have tried their hand here and there, some of the concepts are realistic. The real large-scale production issues are just beginning or yet to come.
Between saturation and creativity
The number of companies entering the AI space has raised concerns about the vast market potential. Companies around the world are using AI as part of their core business. From 10Web's no-code website builder to RainbowAI's weather app and ICarbonX's AI offering personal health analytics for Sherpa's virtual personal assistant, the stage is set for countless others to follow.
Lundbeck acknowledges that the influx of new companies could cause the market to become saturated in some areas, but he doesn't see it as a critical issue, saying, “The business-to-consumer market is probably somewhat close but not quite there yet.” Potentially, while the business-to-business market is still in its infancy, AI has been around for some time. Most corporations only use AI or machine learning for a few visible projects, which are, by the way, easy to implement with low risk, but are not yet being widely implemented.
Koch says the influx of new entrants may create the illusion of an overcrowded AI market, but he sees early saturation as a necessary step to boost future developments.
He said: “AI will never be satisfied because we are only on the first bump in the AI superhighway. It seems saturated as people from other industries are trying to get into the space, but when it comes down to innovation, there is a certain group of companies that are still ahead and have been in the AI space for decades. To drive innovation forward, saturation will rise at the grassroots level, but there are notable players and companies leading the future of AI.
Reflecting on AI market dynamics
Rapid growth, high expectations, and an influx of new entrants into the AI realm have fueled debate about market saturation. Historic tech bubbles like the dot-com era and the blockchain hype serve as reminders of the potential consequences of unproven growth and speculation.
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However, the depth of AI potential cannot be fully realized. The actual impact of the technology speaks to its practical and flexible nature.
It is clear that the AI market is multifaceted. As with any new technology, the challenge is to strike a balance between rapid growth and sustainable development.
