Get inspired for what’s possible with AI
In 2023 the world has experienced an AI awakening – the AI revolution is real and here.
The launch of OpenAI’s ChatGPT in late 2022 not only prompted the fastest mass-adoption of any app ever recorded, it has also given hands-on access to a new technology to everyday people that only then really came to understand the transformative potential AI offers.
One year later, Silicon Valley has cemented its position as the global epicenter of artificial intelligence. There is nowhere else in the world where AI systems are being developed with the same advancement and speed. It is Silicon Valley’s new gold rush and no other sector sees more startups emerge and more money invested in, than AI. It’s not surprising, that 8 out of the 13 current global generative AI unicorns are headquartered in Silicon Valley.
Source: CB Insights
During the APEC summit in November 2023, San Francisco’s Mayor London Breed proclaimed the city’s leadership role as the “AI capital of the world.” In 2022 over 50% (6.8 billion USD) of the global AI VC funding was invested in startups in Silicon Valley. This trend seemed to be repeating itself in 2023. Despite the world-wide drop in AI VC investment of 27% in Q1, Silicon Valley has seen an increase in AI VC of over 40%.
The sector has not only helped to boost VC and startup activity in San Francisco. With companies emerging and growing and founders streaming in, there is new demand for office space and job creation, compensating the mass layoffs the rest of the tech scene has seen in the last year. It is clear, San Francisco is shaping the forefront of AI-innovation.
But what are the hottest trends in AI right now straight out of Silicon Valley? In this article, we’ll unveil what areas and industries are currently being disrupted by startups in the tech hub, exploring the challenges and opportunities they are encountering.
Hot Trends in AI
Y Combinator (YC) is Silicon Valley’s most renowned startup incubator with success stories, like AirBnB and Uber. Each year innovation scouts eagerly await YC’s demo day to see which trends and disruptions are emerging out of the startup world. In 2023, AI was, of course, the absolute dominating sector. Out of 229 portfolio startups, 139 were in AI. Here are the groundbreaking solutions that most startups have been working on:
AI Ops
Artificial Intelligence Operations, or “AI Ops”, is referring to the notion of automating every business process possible. So called “Co Pilots” or “ChatGPT for xyz.” are everywhere: from automating accounting tasks, to negotiating contracts, and even organizing your company’s events. At this point, you might find a startup working on the exact business process that you are trying to automate.
ML Ops
Machine Learning Operations, or “ML Ops”, is referring to solutions that are fine-tuning and optimizing the training, or the deployment and post-processing of Large Language Models (LLMs). Whether it’s adding context to language models with as few as ten samples, pausing and moving training runs in real-time, managing training data ownership and permissions, or fine-tuning models with synthetic data.
Developer Tools
Developer Tools are building the next generation of software. These solutions are tackling the optimization, automation and overall improvement of the developer experience. Some of these solutions are:
- AI-augmented software engineering, the use of AI technologies and natural language processing (NLP) to help software engineers to generate, test, analyze and review code as well as detect bugs.
- API-centric SaaS, a cloud application service designed with programmatic request/reply or event-based interfaces (APIs) as the primary methods of access. It allows different software systems to communicate with each other, enabling the integration of various applications and services seamlessly.
It’s like having a toolbox full of different software that is connected through APIs so that developers can streamline the whole development process in one solution. - GitOps, a type of closed-loop control system for cloud-native applications.
GitOps is an AI-supported control system that helps developers make changes to their computer systems and programs that are then automatically updated. It therefore helps maintaining a history of changes, facilitating easier rollbacks, and making the entire operational process more transparent and auditable. - Internal developer portals, which enable self-service discovery and access to resources in complex, cloud-native software development environments.
Like maps that help developers easily find and access the resources they need. - Open-source program office (OSPO), the center of competency to build strategies for governing, managing, promoting and efficiently using open-source software (OSS) and open-source data or models.
Like a team of experts that sets the rules for opensource development and makes sure everyone sticks to the rules.
A Roadmap for AI: What can we expect to see in 2024 and beyond?
To get a deeper understanding about what is ahead of us in AI development, it makes sense to look at the current global investment trends.
AI Investment Landscape
Due to high interest rates, VC-investments have continued to decline in 2023. In Silicon Valley, AI was the only sector that saw an increase in funding and relatively big deal sizes, at least in the first two quarters. In the first quarter almost 90% of the total global AI funding was spent in Silicon Valley (12.1 bn USD), making it a record-breaking quarter for AI investment. Even though most deals were made in early-stage rounds, the biggest checks were issued to established companies, such as Databricks, Anthropic and OpenAI. Overall, generative AI has been boosting the average deal size.
In 2024 this trend might very well continue. Since the outlook for VC-investments seems to remain volatile, the biggest deals will probably continue to go to established companies, making it hard for new startups to compete.
Generative AI Trends in 2024
2024 will be another pivotal year for AI. The industry is poised to enter a new phase characterized by intentional AI deployment. The emphasis will shift from generative AI (genAI) being a novelty and a platform for technical experimentation to becoming a core component of more deliberate and strategy-driven initiatives. Evidence of this progression has already surfaced. The AI Pulse Survey conducted by Forrester in July 2023 revealed that 67% of enterprises are integrating generative AI into their overarching AI strategies. Furthermore, the survey highlighted a transition in AI from being predominantly a data science and model-building exercise to an endeavor now led by 70% of enterprises under the auspices of their technology organization leadership. This shift signifies a maturing in the approach to AI application within the business sector.
Most important genAI-application trends for 2024
Competition heating up
As the generative AI space grows, so does the competition, with many players eying for market share and investment, leading to an increasingly competitive environment.
GPT-wrappers will struggle to build revenue models
Companies that have built services around GPT (like wrappers or interfaces) may face challenges in monetizing their offerings, especially as the core technology becomes more widely accessible and the novelty diminishes.
The rise of multi-modal-modules
Multi-modal models will enable AI to understand and interpret images, respond to voice commands, and engage in more complex conversations, making AI interactions more versatile and natural.
Opportunity in verticalization
There is an opportunity for companies to specialize in applying generative AI to particular industries or verticals, potentially creating more value and differentiation in the market.
Accelerating healthcare, finance, industrial, and retail
These sectors, in particular, are poised to benefit from generative AI through increased efficiency, new capabilities, and enhanced customer experiences.
Want to stay inspired?
The dynamic landscape of AI in Silicon Valley not only defines the present but sets the stage for the future. With a vibrant startup ecosystem and a more matured approach to enterprise AI, 2024 promises to be a pivotal year. If you don’t want to miss out on the newest and hottest trends coming straight out of Silicon Valley, sign up to our newsletter!
You can also find more info about the lates AI Trends here:
Lessons from 139 YC AI startups (Blog Artificial Ignorance)
Gartner Hype Cycle 2023 (Gartner)
The state of AI in 2023 (McKinsey AI Trends)
