IT Essentials: Is AI winter coming?

The sentiment around AI is cooling

Are we headed for another AI winter?

That's a question on many lips.

The sentiment around AI seems much more negative year than this time last year last. People are a little less amazed and a little more suspicious. There are signs that generative AI has surmounted Gartner’s peak of inflated expectations and is beginning the inevitable descent towards the trough of disillusion.

So could, as has occurred several times before, the funding rug be pulled from under AI as investors fear they are backing a turkey?

Warning lights include a post by Goldman Sachs in which analysts wondered aloud whether 'overhyped' AI processing will ever pay off the massive investments; a finding by VC firm Sequoia Capital that the industry needs to make $600 billion annually just to break even on its initial expenditure; and high-profile failures, some culinary, such as McDonalds bacon-topped ice-cream and Google's recipe for a yummy gummy glue pizza.

Then there's Nvidia's stock sliding even as it announced record profits.

We recently took the temperature of the AI market, probing 92 UK IT leaders for their thoughts.
Asked whether they think AI is a bubble, 13% replied yes, believing a major correction is imminent. At the other end of the scale, 4% were confident that the exponential rise in capabilities and adoption will continue. The largest proportion (30%) said that inevitably there will be dips, but progress will be steady.

For what it's worth I'm in the latter camp. While AI faces some serious headwinds, not least its energy, water and data requirements, as well as a lack of solid use cases, "Pandora is out of her box," as one respondent put it.

So much money has been pumped into AI. so many former ESG goals dropped, so many resources diverted, so many companies pivoting to become "AI-led", that it's going to be hard to change course even if things do go south.

One big difference from previous bubbles is that all the big players have been involved from the early days, rather than it being all about startups, venture capital and froth. There is so much momentum behind it that, while there could be some temporary upsets, forward seems likely to continue.

Rather than an AI winter, it seems more likely we're in for a cold snap.

We'll be covering this research in detail over the coming weeks.

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Our IT Leaders Summit took place last week with some fantastic speakers and panel sessions. You can read coverage on why businesses should employ more neurodiverse people, the impact of AI on creative jobs such as graphic design, and how IT leadership is changing.