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Generative AI, which once garnered significant attention and potential as a game development tool, has experienced a 29 percent decline in deal count in the third quarter of 2023, dropping from 142 deals in the second quarter to 101 deals, according to data from Pitchbook.
Despite the decrease in deal count, the quarter saw a 39.9 percent increase in deal value, primarily attributed to Amazon’s $4 billion investment in Anthropic, a large language model provider. However, excluding this substantial deal, the generative AI sector would have experienced a 51.8 percent decrease in total deal value from the previous quarter. Experts suggest that while generative AI holds impressive potential, its unreliability has led to a cooling of investor enthusiasm for most use cases.
The generative AI sector is described as being in the “messy middle” of AI development. While the potential implications are impressive, practical challenges and limitations have become evident, influencing the market’s momentum.
The decline in generative AI deal count and the market’s shift toward greater deal value with larger investments reflect a maturing landscape where the technology’s limitations and practical considerations are factored into investment decisions.
Despite a recent slowdown in the adoption of generative AI, some industry giant companies continue using this technology. Google was reportedly planning to incorporate generative AI into its ad business. Spotify is testing an AI-powered voice translation tool for podcasts. Popular gaming platform Roblox also announced that it was exploring language-based generative AI to allow developers to create games easier and faster.
On the other hand, not every industry is fond of AI and its applications. The Authors Guild, a prominent trade group representing US authors, has initiated a class-action lawsuit against OpenAI with the core allegation centering on OpenAI’s alleged unlawful utilization of these authors’ literary creations to train its AI chatbot, ChatGPT.
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