The AI Industry in 2024: A Transformative Year
The year 2024 will be remembered as a pivotal time for artificial intelligence (AI), driven by groundbreaking innovations like the release of OpenAI’s Sora, a revolutionary text-to-video generative model, and Google’s Willow, a quantum chip that redefined computational possibilities. These advancements, along with rapid shifts in the AI landscape, set the stage for transformative changes in the years to come.
Let’s start with the numbers. The chart below highlights today’s top AI unicorns. Surprisingly, thanks to a recent surge in its stock price, Palantir has become the most valuable AI company, boasting a market cap of $180 billion, surpassing OpenAI’s $137 billion. Elon Musk’s x.AI secured fourth place on the list, fueled by successive rounds of funding. While the total AI investment for 2024 is still being finalized, it’s expected to exceed $40 billion.
Source: Hive Ventures Analysis
What Happend in 2024
2024 saw some of the most groundbreaking advancements in AI technology, led by key players like OpenAI, NVIDIA and Google.
OpenAI introducing Sora:
Sora, OpenAI’s advanced text-to-video generative AI model, debuted in December 2024, allowing users to transform text prompts into high-quality videos. This innovative tool represents a significant step forward in AI-driven content creation, supporting tasks like storyboarding and video production. Sora caters to various user needs while maintaining safeguards against misuse, such as restrictions on realistic human depictions and watermarks to label AI-generated content.
Despite its limitations with intricate scenes, Sora has transformative potential to revolutionize industries like filmmaking and marketing by streamlining creative workflows. Alongside other advancements like GPT-4o and GPT-o1, Sora cemented OpenAI’s leadership in the AI ecosystem, contributing to the company’s impressive $157 billion valuation by the end of 2024.
Nvidia:
NVIDIA emerged as a dominant force in 2024, becoming the second-largest company by market capitalization globally, valued at over $3.43 trillion. This success was underpinned by its advancements in AI chip architectures, including the debut of the Rubin AI chip.
Rubin, building on the success of the Blackwell architecture, is designed to handle tasks up to 30 times faster than its predecessors. By focusing on a rapid development cycle — with new iterations planned approximately every year — NVIDIA has positioned itself to meet the growing demands of generative AI applications, large-scale data processing, and complex AI model training.
Meta:
Meta’s highlight was the debut of Meta’s Llama 3.1, the largest open-source AI model ever created, boasting 405 billion parameters. Designed to tackle complex multilingual tasks and advanced problem-solving, Llama 3.1 cemented Meta’s status as a serious competitor to proprietary models from OpenAI and Google.
Google: Introducing Quantum Computing-Willow
While Google may not have made significant strides in the large language model (LLM) space in 2024, it certainly generated attention in quantum computing with the introduction of the Willow quantum chip. Featuring 105 qubits, Willow represents a transformative milestone in solving highly complex computational problems. Tasks that would take classical supercomputers approximately 10 septillion years are now being tackled in under five minutes. This remarkable leap is enabled by Willow’s advanced error-correction techniques and scalability, offering a glimpse into a future where computational bottlenecks could become a thing of the past.
However, Willow’s immediate impact on AI is minimal, as it cannot replace GPUs for training AI models or accelerate current workflows. Its primary application lies in solving specialized, complex problems far beyond the capacity of today’s supercomputers. Nevertheless, Willow opens up a tantalizing possibility: a future where quantum-powered computing makes virtually unlimited processing power accessible. This could, in time, lead to the creation of significantly more powerful AI systems, transforming industries and redefining the boundaries of artificial intelligence.
Other notables:
Anthropic secured a substantial $4 billion investment from Amazon, bringing its total funding to approximately $13.7 billion. This financial backing is expected to bolster its research and development efforts while expanding its AI capabilities across various applications. Founded by Elon Musk, x.Ai announced a remarkable $6 billion funding round in December 2024, significantly boosting its valuation to between $35 billion and $40 billion. The funding was led by prominent investors such as BlackRock, Fidelity, and Sequoia Capital.
Looking Ahead to 2025
The Rise of AI Agents and Beyond
One of the standout trends of 2024 was the rapid growth of AI agents. Tools like Microsoft’s Copilot and other emerging AI assistants gained widespread recognition, demonstrating AI’s potential to serve as personal assistants, customer service bots, and creative collaborators. These AI agents extended far beyond corporate settings, making significant inroads into industries such as education, healthcare, and entertainment. They enabled individuals and organizations to interact with AI in increasingly natural and impactful ways.
The consumer electronics market also saw a resurgence, fueled by the rise of AI-powered devices. Microsoft’s Copilot-integrated PCs and Apple’s new AI-enhanced iPhones revolutionized personal computing by prioritizing convenience, adaptability, and enriched user experiences. Meanwhile, global investments in AI technologies surpassed $40 billion, highlighting the growing confidence in AI’s ability to reshape various industries.
Shift in Investment Focus Towards Applications
Up until now, the majority of AI investments have been concentrated on the infrastructure layer and model layer, such as chips, data management, and foundational models. However, we anticipate a shift in 2025, with capital increasingly flowing toward the application layer. This trend will likely align with the rise of AI agents.
Similar patterns have been observed in the evolution of cloud services and SaaS. Early investments often focus on foundational infrastructure, followed by a shift toward cross-industry applications, and eventually targeting vertical-specific solutions. This progression reflects a natural maturation of the AI ecosystem, as investors seek opportunities to leverage existing infrastructure for broader and more specialized use cases.
The Role of Large Action Models (LAMs)
In this evolving landscape, Large Action Models (LAMs) played a crucial role. A LAM is an advanced AI model capable of making decisions and taking actions autonomously. These models are expected to be the “brains” behind AI agents and even robots, enabling more sophisticated, autonomous behaviors. In 2025, we can expect some breakthroughs in this domain as LAMs continue to advance, pushing the boundaries of what AI can achieve in real-world applications.
Multimodal AI
As we move into 2025, one of the defining trends shaping the AI landscape is the rise of multimodal AI. This technology processes and integrates data from various sources — such as text, images, and audio — providing more contextually rich insights and creating more seamless, effective interactions for users.
More M&A coming
Before we jump into 2025, let’s check what happened in 2024.
NVIDIA acquired Run.ai for $700 million to enhance its DGX Cloud platform and optimize AI workload management.
NVIDIA acquired OctoAI for $250 million, focusing on generative AI tools
AMD acquired Silo AI for $665 million and Nod.ai (value undisclosed), signalling its intention to rival NVIDIA in the AI chip and software space.
Cisco completed a $28 billion acquisition of Splunk, integrating cybersecurity and AI-powered observability into its core services.
SAP’s purchase of WalkMe for $1.5 billion to enhance its AI software.
Microsoft acquired Inflection AI for $1.3 billion, further bolstering its portfolio in personal AI technologies. The company also announced a multiyear partnership with French startup Mistral, valued at $2.1 billion, which will allow Mistral to leverage Azure’s infrastructure for developing next-generation large language models.
The competitive nature of the AI space has led to a surge in mergers and acquisitions (M&A) throughout the year. Major players in the industry have pursued strategic acquisitions to enhance their capabilities and expand their offerings, signalling that consolidation in the AI sector will likely continue into 2025.
Conclusion:
Conclusion: 2024 has been a transformative year for the AI industry, with technological innovations, strategic investments, and market expansions all playing critical roles in shaping its future. As AI continues to evolve, the industry is poised for further breakthroughs in the coming years. The rise of AI agents, the development of multimodal AI, and advancements in quantum computing all signal a future where AI will be deeply integrated into both daily life and industry operations. With ongoing investments and innovations, the next few years promise even more rapid change and disruption, setting the stage for an AI-powered world.
