It seems like the sky’s the limit for artificial intelligence. AI chipmaker Nvidia is one of the market’s hottest stocks.
AI is becoming so big it is striking fear into politicians worried about societal effects of having computers run so much of our lives. OpenAI, the largest generative AI outfit, is moving away from its nonprofit model. Tesla chair and tech innovator Elon Musk is suing to block the move because he fears public markets will finance robots taking over the world.
But on the ground level, among investors that are thinking about funding AI startups, there is a growing disquiet. Not that the technology won’t be revolutionary at some point, but rather so much of what now passes for AI is a bit fugazy.
In other words, the information spit out by your AI service isn’t something novel or revolutionary. Instead, it is being ripped-off from various sources without adhering to copyright laws.
One of my private equity sources – who runs a multi-billion portfolio – says he backed off from making several AI venture investments over concerns of copyright infringements.
When discussing the AI business model with company founders, he concluded that computer programs used to cull data points and other pieces of information weren’t properly vetted to comply with the law. He pointed me to several lawsuits that have been filed, including one by artists who claimed that AI created images “built to a significant extent on copyright works,” according to the Hollywood Reporter.
The PE pro likened the situation to that of the early-internet outfit Napster, the once-popular “peer-to-peer” file-sharing service where users could download songs of various artists for free simply by tapping into its vast database of artists’ work.
The service was sued by artists including rock legends Metallica and rapper Dr. Dre for copyright infringement, and forced to shut down after just a few years in operations amid the weight of litigation.
“I’m seeing the same scenario with AI,” the PE source said. “There really is no referencing of where the information is coming from or whether it complies with copyright laws.”
So far, the vast majority of AI services including the most popular — OpenAI’s ChatGTP — remain in private hands. The aforementioned non-profit that created the chatbot has a valuation approaching $100 billion. It has over 100 million users.
Lawsuits could put a dent in the growth as they slow innovation. Meanwhile, the broader AI ecosystem could take a hit in the public markets if the plaintiff bar ramps up the pressure. Shares of chipmakers like Nvidia, but also Microsoft and more recently Amazon could get slammed if litigation starts to overwhelm the nascent technology and slow growth.
“I’m already hearing that the plaintiff bar is planning tons of lawsuits against AI companies for using copyrighted information without attribution,” the PE source added.
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