The two-year milestone of ChatGPT and its influence on financial markets: an examination
Since the public launch of ChatGPT on 30 November 2022, the world of artificial intelligence (AI) has witnessed a significant surge in investment. Top investment funds and strategic investors have heavily invested in AI-related companies, signifying a growing belief in AI's transformative potential.
Mega Funding Rounds and Strategic Investments
The largest VC deal ever, a $40 billion funding round for OpenAI, attracted deep-pocketed strategic investors, including major tech companies and private equity firms. One such investor is Microsoft, which has significantly invested in OpenAI over the last two years.
Another AI research and safety firm, Anthropic, raised approximately $9.7 billion in total funding, with a notable $4 billion round led by Amazon in March 2024. Amazon's investment in Anthropic underscores the involvement of large tech companies in funding AI startups.
Venture Capital and AI Startups
Post-ChatGPT, venture capital activity surged, with around 71% of US VC deal value in Q1 going into AI-related investments. This trend illustrates widespread VC interest in AI startups, with nearly half of all VC capital still flowing into AI startups, excluding OpenAI.
Publicly Traded AI Investment Funds
The Global X Robotics and Artificial Intelligence ETF (BOTZ) is a notable ETF that has tracked AI market dynamics since ChatGPT’s launch. The fund offers exposure to companies benefiting from AI and robotics adoption, and notably tripled the return of the S&P 500 in the first few months of the AI boom after ChatGPT’s release.
Hedge Fund Shifts towards AI-Driven Opportunities
Hedge funds have also reallocated their portfolios towards AI-driven opportunities, increasing stakes in AI-focused stocks. This trend favours higher-upside AI-specific stocks over traditional tech plays.
The Impact of ChatGPT on the Market
The market reaction to ChatGPT's first two years since launch is a mix of optimism regarding AI's potential and cautious consideration of its challenges and risks. Nvidia, the leading developer of high-performance GPUs for AI models, has seen its share price gain 700%, while Google's parent company, Alphabet, has seen a 3.3% drop in share price over the past six months due to the threat that ChatGPT poses to its search engine dominance.
However, concerns about job losses due to productivity gains promised by ChatGPT and other generative AI systems are also rising. A study published by Forbes in July found that 77% of employees using AI said that it had added to their workload and hampered productivity.
OpenAI, the company behind ChatGPT, expects to lose $5 billion this year due to the cost of running data centers and paying software engineers. Despite these financial challenges, OpenAI is working on GPT-5, but it is not expected to be released this side of the new year.
In summary, the investment landscape since ChatGPT’s launch is characterised by a mix of deep-pocketed strategic investors, large tech companies, private equity and sovereign wealth funds, venture capital firms, publicly traded AI thematic ETFs, and hedge funds reallocating their holdings towards AI-specialized equities. These trends highlight robust, diverse capital deployment into the AI ecosystem globally since late 2022.
- Venture capital firms have shown a significant increase in interest in AI startups, with approximately 71% of US VC deal value in Q1 going into AI-related investments post-ChatGPT.
- Hedge funds have reallocated their portfolios towards AI-driven opportunities, favoring higher-upside AI-specific stocks over traditional tech plays.
- Publicly traded AI investment funds, like the Global X Robotics and Artificial Intelligence ETF (BOTZ), have seen increased attention as they offer exposure to companies benefiting from AI and robotics adoption.
