The international AI sector is currently experiencing unprecedented levels of funding. In the first two months of 2024 alone, around $6.9 billion was directed towards funding AI companies. From February 2023 to February 2024, global spending reached a remarkable $45.7 billion. Some of the largest AI companies, including ChatGPT and its competitor Claude, have raised tens of billions of dollars over recent years. Despite this significant influx of capital, the global average monthly funding has decreased by 62% from its peak in 2021. As of March 2024, over $25 billion had been invested in the top 8 AI startups worldwide.
Funding in Europe has soared, with the UK leading the charge. Since the launch of Horizon Europe in January 2021, a total of 297 AI projects have been financed, amounting to 57.7 million euros. In just January and February of this year, 59 projects received financing. Additionally, the EU has announced an investment of 85 million euros to advance research in the tech industry, focusing on AI innovation. Another 206 million euros are allocated to fund AI and data solutions, as well as projects in AI, data, and robotics.
In the United States, billions are flowing into the AI sector. In 2023 alone, $36.7 billion was funnelled into AI firms, reflecting a 61.6% increase compared to the previous year. San Francisco received the largest share of funding, exceeding $20 billion, with New York ranking second with almost ten times less funding. Of the top 100 AI firms, 69 are based in the US, showcasing the country's leadership in this burgeoning industry.
Economic Implications
AI is expected to simplify workers' lives, boost productivity, and enhance incomes by improving the division of labour. However, it is also likely to create unemployment, particularly among low-skilled workers in business administration and industry-specific manual laborers, who may lose their jobs to automation. Goldman Sachs estimates that AI could raise global GDP by 7% over the next decade, while PwC predicts an even higher growth of 14% in the same period.
The World Economic Forum initially forecasted in 2020 that AI would eliminate 85 million jobs by 2025. However, this projection was revised in 2023 to 83 million job losses, with 69 million new openings anticipated, resulting in a net loss of 14 million jobs by 2027. If human-level AI becomes a reality, it is expected to disproportionately benefit major economies, exacerbating international economic and income inequality.
AI also represents a critical step in human evolution, raising questions about whether society will continue to innovate or become complacent, akin to the scenario depicted in WALL-E. Its growing prevalence poses a risk to education, as increasing reliance on technology might undermine innate learning capacities. This issue should be a significant concern for education policymakers.
Market Trends
AI has been a powerful thematic driver in equity markets, leading to rallies across various sectors, from chipmakers to companies merely planning to integrate AI into their operations. However, recent developments have dampened investor sentiment. Nvidia and Super Micro Computers (SMC) faced significant declines in stock value this week, with Nvidia's shares dropping 10% and SMC's by 23%. SMC's decision not to preannounce earnings was interpreted as a sign of weak financial performance, which, in turn, negatively impacted Nvidia due to its chip integration in SMC servers. This led to a combined market loss of $200 billion. Despite the robust investment flows into AI, market sentiment has turned increasingly bearish.
Military Implications
Earlier this week, the US confirmed that they carried out the first ever human vs AI dogfight highlighting how AI is advancing from its traditional roles in sensors and aviation support, and how it has “penetrated” almost every industry in the world (the biggest of course being the military-industrial complex).
Although this is likely to save lives whilst make “fighting” far more efficient and risk-free, it signifies war becoming an ever more desensitised and commercial venture, especially considering current conflicts. The World is already locked into an AI Arms Race with China and the US at the forefront, this recent test may be a catalyst for other nations to explore “AI Military Initiatives”.