Is GenAI a dying fad? A new study predicts 30% of investors will jump ship by 2025 after proof of concept (2024)

What you need to know

• A new study suggests that 30% of investors will withdraw from AI projects by 2025 after proof of concept.
• A separate study also indicated that AI is just hype, and few people use tools like ChatGPT and Microsoft Copilot.
• The study suggests that top executives struggle to identify a profitable path despite their hefty investment in the landscape.

Generative AI has been broadly adopted by top tech corporations like Microsoft and Google, who embrace the technology across their tech stacks. Admittedly, the technology faces a fair share of challenges preventing it from realizing its full potential, including high operation costs, high electricity and water consumption, and more.

Earlier this year, a new report suggested that AI might be a fad and further indicated that no one is using AI tools like ChatGPT and Microsoft Copilot. And now, a new report by Gartner suggests "at least 30% of generative AI (GenAI) projects will be abandoned after proof of concept by the end of 2025." The firm attributes its predictions to poor data quality, a lack of guardrails to prevent the technology from spiraling out of control, and high operation costs with no clear path to profitability.

As you may know, OpenAI is reportedly on the brink of bankruptcy, with projections of making losses amounting to $5 billion within the next 12 months. The ChatGPT maker might need another round of funding from its partners and investors to remain afloat.

According to Gartner's VP Analyst, Rita Sallam:

"After last year's hype, executives are impatient to see returns onGenAI investments, yet organizations are struggling to prove and realize value. As the scope of initiatives widen, the financial burden of developing and deploying GenAI models is increasingly felt."

Profits from AI ventures don't match the hefty investments

Gartner's report highlights the challenges key players have faced in the AI landscape, including their inability to justify the substantial resources ranging from $5 million to $20 million without a defined path to profitability. "Unfortunately, there is no one size fits all with GenAI, and costs aren't as predictable as other technologies," added Sallam.

According to Gartner's report, AI requires "a high tolerance for indirect, future financial investment criteria versus immediate return on investment (ROI)." As you may know, top company executives are more focused on generating revenue than entering risky business ventures head-first.

Early adopters of AI are ripping benefits from their timely investment. Over the past few months, Microsoft, OpenAI, and NVIDIA have scrambled for the world's most valuable company crown. Even Apple (often considered a late bloomer in the space) got a taste of the coveted seat thanks to its new AI strategy — Apple Intelligence.