--- title: "AI Startups Are Suddenly In Big Trouble" description: "As the speculative bubble surrounding AI begins to burst, the people behind them — and their financiers — are starting to feel the burn." date: "2024-04-29" modified: "2024-04-29" authors: - name: "Noor Al-Sibai" job_title: "Senior Staff Writer" link: "https://futurism.com/authors/nooralsibai" url: "https://futurism.com/the-byte/ai-startups-money-trouble" categories: - "Artificial Intelligence" tags: - "anthropic" - "stable diffusion" - "Startups" - "the digest" --- # AI Startups Are Suddenly In Big Trouble ![As the speculative bubble surrounding AI begins to burst, the people behind them — and their financiers — are starting to feel the burn.]() *\Image: Getty / Futurism\* ## Bubble Bubble As the speculative bubble surrounding AI [shows signs of bursting](), the startups that banked on the tech — and their financiers — are starting to feel the burn. As the [*New York Times* reports](), AI startups are having major issues as they continue trying to compete with the big boys while experiencing the harsh reality of their [enormous costs](). From the makers of the image generator Stable Diffusion to Anthropoic, which was founded by OpenAI exiles, startups are staring down the barrel of their expenses — which in addition to the regular cost of running a tech startup also include the massively expensive compute power required to run large AI models. "You can already see the writing on the wall," Ali Ghodsi, the CEO of the data storage and analysis company Databricks, told the *NYT*. "It doesn’t matter how cool it is what you do — does it have business viability?" ## Toil and Trouble Perhaps the biggest issue, as the report suggests, is that investors who [spent big]() on [AI hype]() over the past few years are now seeking returns that have yet to materialize. As the investment tracker PitchBook told the newspaper, there has been $330 *billion* poured into roughly 26,000 AI startups over the past three years — a two-thirds increase from the period between 2018 and 2020. Held up against OpenAI — which is, of course, backed by the tech giant Microsoft — the vast majority of those firms have not made the kinds of industry-shifting advancements investors expect, all while needing to spend more and more on things like [infrastructure and compute](). Anthropic is a prime example. According to two insiders who spoke to the *NYT* anonymously, the startup founded by ex-OpenAIers is spending $2 billion per year while only bringing in between $150 million to $200 million in sales. After bringing in [more than $7 billion]() from companies including [Amazon]() and [Google](), those figures are looking pretty dire. And Stability AI, the maker of the image generator Stable Diffusion, has been very publicly sinking. After securing more than [$100 million]() in fundraising in 2022, the company has spent the [better part of the last year]() struggling to pay its bills, and as a wild [*Fortune* expose]() shows, its bombastic [ex-CEO](), Emad Mostaque, seems to have been at the [heart of its chaos](). Since [Mostaque's resignation]() in March, the company behind one of the most popular image generators [laid off 10 percent of its staff](). Investors take note: just because something is buzzy doesn't mean it has a [pathway to financial viability](). **More on AI startups:** [*Venture Capital Firms Are Actually Considering Giving Elon Musk $6 Billion For xAI*]() ## Author At Futurism, I've often been drawn to unpacking the narratives that underlie technological, scientific and medical progress, with a special interest in areas of conflict and ambiguity that end up setting agendas and steering the fates of both elites and the hoi polloi. I'm a committed generalist, but I often find myself returning to work involving NASA and the private space sector, the effects of AI on media and society, and the mechanics of the pharmaceutical industry, with a specific focus on the spread of GLP-1 drugs like Ozempic and Wegovy. Prior to Futurism, I worked for publications ranging from Media Matters and Truthdig to Raw Story and Bustle. I'm also the author of "Myspace Scene Queens," a 2024 title in Instar Books' acclaimed "Remember the Internet" series. My work at Futurism has been cited by outlets including the New Yorker, Slate, Nieman Lab, the Verge, the MIT Technology Review, the Sunday Times, and the Daily Beast. I grew up in North Carolina, attended the University of North Carolina at Asheville, and now live in Brooklyn, New York. In my free time, I'm an avid reader and music fan; you can probably find me at a local poetry reading, concert, underground rave, or DJ set. I'm the proud parent of an ineffable orange cat named Mee-Mow. ### Author social links [Bluesky]()