AI Emerges as a Bright Spot in a Sluggish Tech Market

In the face of a tech downturn, AI remains on the rise, breaking new ground every day
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On his India visit, Microsoft CEO Satya Nadella declared that he was very bullish on the cloud, especially the next phase consisting of AI and cloud – which he believed every business in India would benefit from. 

Indeed, according to a recent AIM Research report, AI-generated revenue stood at USD 12.3 billion in 2022, with the BFSI sector showing the highest adoption rate at 65%. Besides, the AI and cloud infrastructure is also considered to show the greatest jump in investment priorities in 2022. All of this, while the global tech world was going through a recession, with companies like Meta, Amazon, Google, Salesforce, Twitter and others laying off employees in numbers that surpassed the levels of the great recession level. 

Investments in AI have not only catered to building LLMs and entertaining chatbots, but also enterprise applications. In the TCS earnings call for Q3FY23, COO N Ganapathy Subramaniam said that the tech spend seems to be intact, with everybody betting on cloud-related investments. Specifically, investments around Cloud 2.0 applications like employing AI at the edge will continue to be so since stopping the deal pipeline and starting again is not affordable for enterprises. 

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A similar sentiment was shared by Nadella, who alluded to the cloud boom in 2007-2008 as the last transformatory paradigm, adding that the next phase will be carried out by Artificial Intelligence (AI). 

The next-big thing

Cloud 2.0 embraces the serverless architecture paradigm, where companies can run full application functionality or APIs without having to manage servers or back-end infrastructure. Additionally, it enables businesses to switch their IT spending from a Capex to an Opex model during the entire time that the applications are being developed, saving overall costs by about 60%.

Siddhesh Naik, IBM country leader (Data, AI, and Automation), told AIM that there are a lot of positive things happening for startups and organisations in areas of manufacturing, health, transport, and taxation, etc, as they begin to utilise the data served by the government (in a secure manner) as an API economy and build offerings on top of that.  

Edge AI is another area enterprises have been working on, bringing data closer to where needed, thereby improving the response time and saving bandwidth while enabling less constrained data analysis. While currently only 10% of data is created and processed outside a traditional data center or cloud, Gartner predicts that this would increase to 75% by 2025. 

Along similar lines, Naik stressed that the other thing that has evolved with 5G is the whole thing about consuming data at the edge, which allows using cloud capabilities without physically moving the data. For instance, the recently announced IBM-Airtel partnership, which will utilise IBM Cloud Satellite to deploy Airtel’s edge computing platform. The platform will enable large enterprises across multiple industries, including manufacturing and automotive, to accelerate innovative solutions that securely deliver new value to their clients and operations at the edge.

Edge computing, together with 5G technology, has the potential to create a cumulative economic impact of $1 trillion by 2035.  

AI in other areas

Simultaneously, we are seeing a 4-5% increase in mergers and acquisitions across AI & analytics service companies as large organisations continue consolidating capabilities to fill the gap to cater to the data-driven development needs of enterprises across industries. Businesses are also using automated MLOps to accelerate delivery by continuously monitoring ML models to yield high-impact business insights and open up new opportunities to improve customer experience. According to Research And Markets, the AutoML market, which generated a revenue of $300K billion in 2019, is expected to increase to $14.5 billion by 2030.

Finally, coming to the ‘consumer-facing’ AI applications – namely, large language models and their generative AI applications – which witnessed a surge with company deployments. The trend was identified as ‘FastSaaS’, which means that companies can simply package text and image-generation APIs with no code capabilities to build software products. Companies like Jasper AI, Notion, Mem X, Writersonic and numerous others use GPT-3 API to build their offerings. 

A glimmer of hope, but…

The tech market looks uncertain at the moment, with companies rushing to optimise and focus on efficiency – recent layoffs attest to that. It is quite likely that the market will change in the coming recession. However, AI continues to make long strides, including in areas like generative AI, foundation models, smart robots, NLP, autonomous vehicles, computer vision, data engineering, AI cloud services, and many others. 

But, AI companies are not in-themselves immune to the surrounding environment. Recently, Scale AI announced that it would lay off 20% of its workforce. In an official statement, the company said that it witnessed strong sales growth through 2021 and 2022, which led them to move towards increasing the headcount. What they didn’t realise though, is that many of the industries they served, such as e-commerce and consumer technology, are facing the repercussions of the pandemic and adjusting to the market reality. So, while AI is booming, and breaking new ground everyday, the industry is still coping with the daunting macroeconomic conditions. 

Ayush Jain
Ayush is interested in knowing how technology shapes and defines our culture, and our understanding of the world. He believes in exploring reality at the intersections of technology and art, science, and politics.

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