☕ Subsiding expectations

Fewer blockbuster VC deals for AI startups.

May 01, 2024 PRESENTED BY It's Wednesday. It'll likely come as no surprise to anyone here that AI is still the big tech news du jour, but what once felt like a fever pitch is now decidedly moderating. We've got three examples of tempering AI expectations for you today from Tech Brew's Patrick Kulp and IT Brew's Tom McKay. In today's edition: Investors are still hot on AI, but blockbuster deals are slowing Google and Microsoft are still riding the AI wave Majority of devs will use AI tools by 2028, survey finds—but don't expect massive productivity gains —Patrick Kulp, Tom McKay, Annie Saunders AI The new deals Feodora Chiosea/Getty Images Investors are still ready to whip out their wallets for AI startups, though there are some signs of possible growing pains ahead for the generative AI craze. A report from Crunchbase this week found that the number of deals and amount of funding being poured into AI remained robust in the first quarter of 2024, despite fewer eye-popping cash infusions overall than during parts of last year. Venture capitalists sank a total of $12.2 billion into AI-related startups across 1,166 deals in the first three months of the year, a 4% uptick in total funding and a 9% increase in deals from the previous quarter. While total investment was down about 25% YoY, Chris Metinko, the report's author, noted that Microsoft's monster $10 billion check to OpenAI last January skewed the scales a bit. Fewer headliners: Those kinds of blockbuster cash infusions may be growing fewer and further between. The report noted that the quarter saw only one billion-dollar-plus deal (the Chinese startup Moonshot AI) and only two others that surpassed $600 million (California-based humanoid robot startup Figure and China-based AI media startup MiniMax). "While that is still impressive, it seemed like such rounds were being raised every week by an AI startup just last summer as the sector saw some of the biggest raises of 2023," Metinko wrote. Keep reading here.—PK PRESENTED BY SPLUNK All systems are a no go The key to keeping your org's operations smooth and steady? Digital resilience—aka ensuring that your mission-critical digital systems remain secure and reliable, no matter the ups and downs. That sweet, sweet spot of resilience comes from being able to react to incidents and fix problems faster. Of course, the challenge is making this happen across sprawling tech stacks. Luckily, Splunk can help. Splunk gives you greater control with unified security and observability to help sidestep outages. And with this kind of real-time visibility, your security, IT and engineering teams can work together to predict problems + fix issues fast, before they become major disruptions. Ready to upgrade your resilience? Hit the ground running with a free trial. AI In the clouds Francis Scialabba Microsoft and Google are proving there's money to be made in generative AI—at least when there are cloud services to sell along with it. While investors may be growing impatient with Mark Zuckerberg's far-sighted AI dreams, things looked rosier for other competitors in the Big Tech AI race in the last quarter. Google and Microsoft both posted better-than-expected results, aided by strong growth in demand for their respective cloud computing businesses. Both companies continue to spend an increasing amount on data center infrastructure and chips to support AI, and Google helped soothe investors by announcing its first-ever cash dividend. Microsoft, meanwhile, seems to be proving it can earn returns on this spending both in the cloud and on its Copilot software. Copilot's seat: Microsoft said its Azure cloud services grew 31% in its fiscal third quarter, fueled in part by companies building AI tools on top of it. "Azure has become a port of call for pretty much anybody who is doing any AI project," CEO Satya Nadella said during an earnings call. "And so that's sort of been a significant help for us in terms of acquiring even new customers." Keep reading here.—PK AI Productivity plateaus Francis Scialabba The majority of professional software engineers will be using AI assistants by 2028, Gartner projects—but tech execs expecting massive increases in productivity are likely to be disappointed. According to Gartner, while under 10% of software devs were using such assistants in early 2023, another survey in late 2023 showed 63% of organizations were piloting or deploying them. By 2028, the consulting firm expects three out of four devs to be using AI assistants regularly on the job. "You see the jump," Philip Walsh, a senior analyst in Gartner's software engineering practice, told IT Brew. The number of devs using AI assistants had already risen from under 10% in early 2023 to 18% by October, Walsh said, and an additional three-fifths of respondents reported their organization was planning, piloting, or deploying AI tools. That said, he cautioned productivity gains in practice might be modest, even if some of the most optimistic projections—like time savings of up to 50% on some tasks—are correct. "It's very difficult to turn time saved into time reapplied," Walsh said. "With an AI code assistant, the time savings are coming in five, 10, 15, 20-minute increments…If time savings don't come in a certain large enough threshold, your developers aren't going to immediately just launch into the next ticket in the backlog." Keep reading here.—TM TOGETHER WITH INVESCO QQQ Rethink what's possible. Get exposure to some of the world's most disruptive companies pushing the boundaries of tech and innovation. Invesco QQQ tracks the Nasdaq-100 Index®, comprised of leaders in tech and other key sectors powering the modern economy. Learn more about QQQ. Invesco Distributors, Inc. BITS AND BYTES Stat: 16%. That's the percentage of parents in the US who think their kids are "addicted to online shopping," according to WebPurify's Kid Commerce report, which was shared exclusively with Retail Brew. Quote: "We've spent billions of dollars gathering information and reporting news at our publications, and we can't allow OpenAI and Microsoft to expand the Big Tech playbook of stealing our work to build their own businesses at our expense."—Frank Pine, the executive editor overseeing newspapers owned by Alden Global Capital, in a statement quoted in the New York Times about eight daily papers' lawsuit against Microsoft and OpenAI accusing them of illegally using news content to power their AI products Read: Amazon is filled with garbage e-books. Here's how they get made (Vox) Stay resilient: Keep your systems secure and reliable with Splunk. See how Splunk gives you greater digital control with unified security and observability—so you can sidestep major disruptions. Start with a free trial.* *A message from our sponsor. JOBS Forget generic job searches. CollabWORK leverages the power of community to connect you with relevant opportunities in Slack channels, Discord servers, and newsletters like Tech Brew. Land your dream job through the power of your network with CollabWORK. Senior Engineering Project Manager at Nestlé Purina (in person) Senior Engineer ASRS/Automated Warehouse Systems at Nestlé Purina (in person) Stationary Engineer at Nestlé Purina (in person) SHARE THE BREW Share Tech Brew with your coworkers, acquire free Brew swag, and then make new friends as a result of your fresh Brew swag. We're saying we'll give you free stuff and more friends if you share a link. One link. Your referral count: 0 Click to Share Or copy & paste your referral link to others: emergingtechbrew.com/r/?kid=b3968dba Written by Patrick Kulp, Tom McKay, and Annie Saunders Was this email forwarded to you? Sign up here.   Guide → What is AI?   Guide → What is 5G? 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