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After a 2023 of AI hype, 2024 will be when things come back down to earth

Alan Murray, Nicholas Gordon
·1-min read

Good morning.

Kudos to my colleague Jessica Mathews, who started the New Year by assembling the views of smart money investors on generative AI prospects for 2024. You can read her full report for Fortune’s Term Sheet newsletter here. But for the time-crunched, here’s my summary: AI has enormous potential to transform business and society, but don’t expect a straight-line climb to the sky. This year is likely to be one of retrenchment, as investors discover many of the companies they threw money at don’t have a workable business model, and many big companies find that the cost of compute outweighs the benefit. And of course, there are also the Four Horsemen of the AI-pocalypse: Data Bias, Data Security, Copyright Infringement, and Hallucination.

Here’s the best quote of the bunch:

“Due to overhyped expectations and free-flowing AI budgets in 2023, we’ll see significant churn among AI companies in 2024 as companies pull back on AI experimental budgets. Many companies will see growth stall and cash burn increase as they figure out business models, including pricing, and deep product market fit use cases. The companies that will continue to grow and thrive will figure out measurable ROI cases and deeply embed into existing workflows.“

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—Cathy Gao, partner, Sapphire Ventures

I suspect this anticipated churn may have something to do with why high-flying tech stocks—the so-called Magnificent Seven—are taking a breather in the first week of the year.

And don’t read too much into the fact that BYD has slightly surpassed Tesla in the market for electric vehicles. The two compete at wholly different price points and in largely different geographical markets. Suffice it to say that both are contenders, with dozens—or in China, hundreds—of others struggling to keep up.

More news below.


Alan Murray
@alansmurray
alan.murray@fortune.com

This story was originally featured on Fortune.com