It’s 2024, and a special week of Term Sheet.
In a longstanding tradition for this newsletter, we ask readers to weigh in on what the new year will bring for the private markets. This year, we’re dedicating the whole first week of January to the Crystal Ball, and today’s edition features a collection of predictions readers made on artificial intelligence.
Is there too much hype around artificial intelligence? Or not enough?
Here’s what you had to say.
Note: Many answers have been shortened for clarity and/or brevity. The deals section will be back next week!
Funding: The Gen AI reckoning
At least one AI startup will raise a substantial round of financing before the investors realize that the company contains no actual humans and the founder is a bot. —Ivan Gaviria, partner, Gunderson Dettmer
Next year will be a year of reckoning for Gen AI. As the novelty factor fades for tourist investors, early adopters who raised at hundreds or thousand times revenue multiples may go bankrupt or get acquired for fractions of their valuations, while the elusive few that find true product market fit will become the new monopolies. —Pegah Ebrahimi, cofounder and managing partner, FPV Ventures
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. —Cathy Gao, Partner, Sapphire Ventures
2023 was year 1 of the current AI hype cycle and I expect it to continue for another 9 months or so. In every tech hype cycle – whether it’s mobile in 2009 or fintech in 2021 – there’s an initial period where there’s a flood of investment, FOMO, and everyone gets a huge valuation. But after a couple years, many of those companies don’t grow as fast as you’d hoped. Everything starts to feel busy and you feel disillusioned. —Immad Akhund, cofounder and CEO, Mercury
AI related companies are going to continue to be the bulk of what we see next year. —Aaron Jacobson, partner, NEA
2024 will get cold for many hot AI startups, with wary VCs questioning how many winners there will actually be in the generative AI market and pulling back investment to the cash-burning startups. —Chris Metinko, senior reporter, Crunchbase News
In 2024, over $200B will be spent powering AI infrastructure, as hyperscalers and upstarts alike continue their robust demand for AI compute. —James Luo, partner, CapitalG
Replacing people?
A majority of Gen Z will have at least a close or best friend that is AI-generated discussing quotidian content. Making internet friends from Discord, Twitter, Twitch, Roblox, etc. will have prepared the younger generation to maintain relationships with people they’ve never met face-to-face, and retention will be even higher with AI friends as these companions will cater to each person’s specific interests and emotions. These relationships will be predominantly text-based but will eventually evolve to include voice and potentially video in the future. —Lindsey Li, Investor, Bessemer Venture Partners
AI isn’t going to take away our jobs or control us, but people will need to start embracing automation. Personal AI agents will evolve and adapt, but instead of being an all-knowing intelligence, they will be tools that act as tireless assistants, relieving humans from tedious tasks. —Michael Stewart, partner, M12
Despite warnings that GenAI and other intelligent software will slowly—or not so slowly—take away jobs from human developers, the industry should instead expect to see more job listings for security professionals that require extensive background in developer roles. This is because as every vendor across the globe scrambles to bolster their security solutions to stand up against AI-based attacks, tried-and-true developers will become essential in carrying out strategies that ensure minimal-to-no vulnerabilities….The expected benefits of LLMs—e.g. being able to use natural vs. programming language—will not be enterprise-ready in the next 12 months, so companies need skilled developers to implement DevSecOps successfully. —Eyal Mamo, VP of engineering, Crowdstrike
The buzz about Gen AI being the silver bullet and disrupting every process as we know it will not materialize. Generative AI excels at many things, such as data aggregation, analysis, and spinning up new insights from such data. Plenty of existing digital businesses provide the infrastructure needed for AI to thrive, and thus some processes can be more efficient with AI. However, there will be plenty of use cases that still need evidence that GenAI will move the needle. —Simon Wu, partner, Cathay Innovation
Many will realize that there is still a technology gap between what AI can do today and what we hope it can do in the future. —Rob Rueckert, partner, Sorenson Capital
The next big thing?
Large Language Models will shrink. Domain specific models will be trained on smaller datasets and outperform general purpose LLMs. Similarly, emerging architectures that shrink the size of models, such as Liquid Neural Networks, which dynamically adjust the model size by distilling tasks and dropping irrelevant information, will unlock exciting, new deep learning use cases. For instance, in manufacturing, many devices on site lack the processing power to run sophisticated machine learning models but smaller models, that can run on such devices, will unlock new capabilities for edge computing. —Rudina Seseri, founder and managing partner, Glasswing Ventures
In 2024, expect a clearer distinction between authentic AI applications and tech superficially marketed as AI. The real measure of AI's success will lie in its ability to address customer challenges and tackle core business issues. Platforms and applications that excel in these areas will win the market while solving business problems in ways that were previously impossible. —Megh Gautam, Chief Product Officer, Crunchbase
Enterprise AI moats—and shareholder value—for foundational model providers, like ChatGPT, will be challenged by open-source equivalents, beginning a tectonic shift in the market. The existing enterprise shareholder value will be destroyed, and the consumer value gained will be massive. —Richard Dulude, cofounder and partner, Underscore VC
In 2024, we're going to see a shift in phases from AI toys (hype-first products that capitalize on the latest tech) to native AI products (products that utilize AI to solve long standing human needs in innovative ways). —Jacob Andreou, partner, Greylock
Generative AI will make social platforms social again. The big social platforms have become de facto entertainment platforms at the expense of actual social interaction, and ironically AI could change all this. You don’t have to be an expert painter, drawer, or singer to express yourself elegantly. Anyone can have a creative idea and use gen AI to bring it to life. This ease of creation will encourage more expression, more storytelling, and more interaction, seeding the next generation of social platforms. “Look what I made” is the new “what’s on my mind.” —Ashley Lundström, partner, EQT Ventures
The rise of AI has created a huge demand for computing power and storage space, not to mention energy. In 2024, I expect we’ll see more innovation taking place in data centers, with opportunities for companies that can improve networking efficiency, access alternative sources of power, and find better methods for cooling the immense heat generated by GPUs. —Erin Price-Wright, partner, Index Ventures
The big dogs
With the emerging learnings in core neural net architectures that led to the transformer and dominance by OpenAI, it is likely that their imminent release of GPT5 will be surpassed in specific performance benchmarks by a new dark horse market entrant, on the backs of more efficient architectures, improved multimodal capabilities, better contextual understanding of the world, and enhanced transfer learning. These new models will be built on emerging research in spatial networks, graph structures, and combinations of various NNs that will lead to more efficient, versatile, and powerful capabilities. —Ethan Batraski, partner, Venrock
We hear a lot about the players vying for leadership in AI, but the real sleeping giant is Meta. Meta's generative AI capabilities, supported by its many billions of diverse social data points including photos, videos and text, will leapfrog Google and Open AI in the AI race. They understand how humans truly interact with each other, and by harnessing their global platform as a launchpad, Meta has the potential to revolutionize the landscape of everyday life, bringing AI into any imaginable moment. They are positioned perfectly to be at the forefront of widespread adoption, where AI seamlessly integrates into the very fabric of every household. —Alex Beckman, founder and CEO, On Platform
Google, Meta, and Microsoft will continue to grow revenues, but they will have roughly 10% fewer employees five years from now as AI productivity improvements cannibalize growth and absorb support, marketing, development, and administrative roles. At the same time, slowing revenue growth rates will drive campaigns to find operating expense efficiency. —Mark Sherman, managing partner, Telstra Ventures
Amazon will launch AI-powered search. Generative AI has revolutionized online search, such as through ChatGPT and Microsoft Bing. One of the biggest Internet search engines is Amazon.com, which is the 5th highest traffic website in the U.S., and arguably the default search for e-commerce in the U.S. Expect Amazon to integrate generative AI into its search bar soon, allowing shoppers to visit Amazon not only for shopping, but also for inspiration and get answers for the day-to-day. —Bob Ma, investment manager, WIND Ventures
Ethics and safety
Generative AI will be weaponized to drive misinformation around the U.S. election, forcing regulators to act before the problem is fully understood resulting in reactionary legislation that is constantly behind the state-of-the-art technology and largely ineffective. —Graham Brooks, partner, .406 Ventures
With more than 1 in 3 Americans having avoided going somewhere due to fear of gun violence, we’ll see a stark difference among the companies that have—and have not—successfully applied AI to making our lives easier and safer while prioritizing the needs of the public. —Peter George, CEO, Evolv Technology
Etc.:
At least one government will attempt to ban people from representing themselves in court with AI assistance. —James Clough, CTO and cofounder, Robin AI
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
Submit a deal for the Term Sheet newsletter here.
