Is the AI bubble about to burst?

Welcome back to a new edition of AI Odyssey!

Here are the top updates on everything that happened in AI this week.

1: Is the AI bubble about to burst?

The AI hype train might be hitting some turbulence. After a roller-coaster few weeks in the stock market, whispers of an AI bubble about to burst are growing louder.

The skyrocketing stocks: AI-heavy companies have seen their stock prices soar. Nvidia’s stock has tripled since last summer, and Google and Microsoft have enjoyed big boosts too. But when stock prices jump without clear value creation, analysts start getting nervous.

Déjà vu? Remember the dot-com bubble of 2000? Stocks skyrocketed on internet hype, only to crash hard. Could AI be heading down the same path?

The bubble talk: While AI could add $15 trillion to the global economy, recent earnings from Google and Tesla have been underwhelming. Plus, public trust in AI is shaky, and businesses are struggling to profit from it.

Why this might be different: Unlike many dot-com era failures, today’s AI leaders—Microsoft, Nvidia, Alphabet, Meta—are already profitable with diverse revenue streams. They’re not going anywhere, even if AI doesn’t pan out as expected right away.

Legal hurdles: Big Tech isn’t bulletproof. Google faces an antitrust case, and Nvidia is under scrutiny for its AI chip market practices. These challenges could shake up the landscape.

New kids on the block: Startups like OpenAI and Anthropic are more focused but have big tech backing. The AI startup scene is less crowded than the dot-com era, possibly avoiding the same fate.

Should you invest? Not investment advice, but here’s a take: A correction seems likely. Despite the hype, AI's long-term prospects are strong. It's transformative, like the internet was, but strategic thinking is crucial. Companies that rethink their business models with AI in mind—like Amazon and Netflix did with the internet—are likely to thrive.

Yes, there might be a bubble. But bubbles burst and leave behind the true innovators. Keep an eye on practical applications and real value creation, not just the hype.

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2: Fixing AI’s 'shoplifting' problem

AI’s been "shoplifting" content, and Bill Gross, the mastermind behind pay-per-click, has a fix. Enter ProRata, his new startup aimed at making AI pay for what it uses.

The problem: AI companies scrape data without permission, claiming it’s necessary for progress. Gross calls it theft. "They’re laundering the world’s knowledge," he says.

The solution: AI pay-per-use

Gross’s ProRata aims to create a fair system where AI companies pay for the content they use. Here’s how it works:

• Revenue sharing: ProRata will track the origins of AI-generated content, break it down, and pay the original creators their share.

• Patent-pending tech: The company has developed algorithms to assign attribution and manage payments.

ProRata has deals with Universal Music Group, The Financial Times, The Atlantic, and Time. They've also signed authors like Tony Robbins and Scott Galloway.

What’s next?

Launching in October, ProRata’s AI search engine will only use licensed data, proving quality beats quantity.

Ed Newton-Rex of Fairly Trained praises ProRata for leading with licensed data. It’s a game-changer for ethical AI.

The business model: ProRata plans to license its attribution and payment technologies to other companies, making it an affordable option for AI firms to ensure fair use. Gross wants to make it as ubiquitous and low-cost as Visa or Mastercard fees.

The bottom line: ProRata is setting a new standard for fair use in AI. Stay tuned for more updates on this industry shake-up!

3: OpenAI bets $60 million on AI hardware startup Opal

OpenAI, the company behind ChatGPT, is making a surprising move into the hardware space. They’re leading a $60 million Series B funding round for Opal, a startup best known for its $300 professional-grade webcams. But there’s more to this story.

The big move: OpenAI’s CEO Sam Altman has long been interested in consumer AI devices. He's invested in wearable AI pin startup Humane and worked with ex-Apple designer Jony Ive on a personal AI device. Now, OpenAI’s startup fund is backing Opal, which has historically made webcams but plans to pivot towards AI-powered creative tools.

Why Opal?

Opal, with backing from YouTuber Casey Neistat and TikTok stars Charli and Dixie D’Amelio, isn’t the obvious choice for a large language model developer. But Opal plans to develop new devices using OpenAI’s AI models, transforming from webcam maker to AI hardware innovator.

The vision: Opal envisions creating devices that serve as creative tools rather than AI companions. Think of an intercom-like device on your desk that helps brainstorm, research, or write for creative projects. Opal will work closely with OpenAI researchers to prototype these ideas, functioning almost like a research lab.

OpenAI’s growing interest in hardware: This investment is part of a broader trend. OpenAI recently restarted its robotics team and partnered with startups developing humanoid robots. Altman’s personal investments in Humane and a project with Jony Ive, possibly involving earbuds with cameras, also show his commitment to integrating AI into physical devices.

Challenges ahead: Despite high-profile backing, success isn’t guaranteed. Other AI device startups like Humane have struggled with negative reviews and poor sales. Rabbit’s AI-powered devices face issues with speed, battery life, and constant internet requirements. But OpenAI’s multiple bets increase their chances of finding a winning formula.

OpenAI’s investment in Opal highlights their growing interest in how AI can power physical devices. With plans to integrate their voice AI models into new hardware, they’re betting big on the future of AI-driven tools.

That’s a wrap! See you again for a fresh dose of AI Odyssey soon. 😎