A year ago, the generative AI mania sweeping through Silicon Valley and Wall Street faced a serious reality check.
In a widely quoted note, Goldman Sachs’ head of equity research, Jim Covello, questioned whether the companies planning to pour $1bn into building generative AI would ever see a return on the money. A partner at venture capital firm Sequoia, meanwhile, estimated that tech companies needed to generate $600bn in extra revenue to justify their extra capital spending in 2024 alone — around six times more than they were likely to produce.
The warnings helped to trigger the first real test of investment sentiment since the launch of ChatGPT electrified the industry. Revenue from the end customers who were meant to benefit from this new technology was negligible. Where were generative AI’s “killer apps”? It led to a summer of angst for tech investors.