Status of AI Business Adoption

Dr Alan Thompson reports that OpenAI says 92% of Fortune 500 companies are subscribed to GPT, and the average spend by each organization has now hit US$18,000,000 per year.

In 2023, the average spend across foundation model APIs, self-hosting, and fine-tuning models was $7M across the dozens of companies that megaVC Andressen Horowitz spoke to. Nearly every single enterprise they spoke with saw promising early results of genAI experiments and planned to increase their spend anywhere from 2x to 5x in 2024 to support deploying more workloads to production.

By Andressen Horowitz calculations, thet estimate that the model API (including fine-tuning) market ended 2023 around $1.5–2B run-rate revenue, including spend on OpenAI models via Azure. Given the anticipated growth in the overall market and concrete indications from enterprises, spend on this area alone will grow to at least $5B run-rate by year end, with significant upside potential. Enterprises have prioritized genAI deployment, increased budgets and reallocated them to standard software lines, optimized use cases across different models, and plan to push even more workloads to production in 2024, which means they’ll likely drive a significant chunk of this growth.

Over the past 6 months, enterprises have issued a top-down mandate to find and deploy genAI solutions. Deals that used to take over a year to close are being pushed through in 2 or 3 months, and those deals are much bigger than they’ve been in the past