Home / Business and Politics / Investments in Artificial Intelligence in 2021 Increased to $93.5 Billion

Business and Politics

Investments in Artificial Intelligence in 2021 Increased to $93.5 Billion

Author: Jozo Knez

March 22, 2022

The Stanford Institute for Artificial Intelligence has published a report outlining all major shifts in the industry, as well as the drawbacks that arise with the increasing implementation and use of artificial intelligence systems. This is the fifth year that Stanford has published its report, and this year particular attention is focused on research and development, technical performance, technical ethics of artificial intelligence, the economy and education, as well as policy and governance.

– This year’s report shows that artificial intelligence systems are beginning to be widely applied in the economy, but at the same time as they are implemented, ethical issues related to artificial intelligence are becoming more pronounced. This is linked to the broad globalization and industrialization of artificial intelligence – the authors state in the report.

Funding Trends

This year’s edition of the Artificial Intelligence Index shows that private investments in artificial intelligence have increased while the concentration of investments has intensified. Private investments in artificial intelligence amounted to approximately $93.5 billion in 2021, more than double the total private investments in 2020, while the number of newly funded companies related to artificial intelligence continued to decline – from 1,051 companies in 2019 and 762 companies in 2020 to 746 companies in 2021. In 2020, there were four funding rounds worth $500 million compared to fifteen in 2021.

– Among the companies that disclosed the amount of funding, the number of funding rounds for artificial intelligence in the range of $100 million to $500 million more than doubled in 2021 compared to 2020, while funding rounds between $50 and $100 million also more than doubled. In 2020, there were only four funding rounds worth $500 million or more, while in 2021 that number increased to 15. Companies attracted significantly larger investments in 2021, as the average size of private investment in 2021 was 81.1 percent higher than in 2020 – the report states.

The data from the Artificial Intelligence Index for 2022 aligns with a recent report from consulting firm Forrester, which indicates that the size of the artificial intelligence market is lower than many analysts previously estimated. According to Forrester, as artificial intelligence is increasingly seen as critical, large technology companies will add artificial intelligence to their product portfolios, causing AI startups to lose market share and potentially become major acquisition targets. For example, last year PayPal acquired the AI and payment startup Paidy for $2.7 billion, while Microsoft acquired the voice recognition company Nuance for nearly $20 billion.

As shown by the Artificial Intelligence Index for 2022, companies specializing in data management, processing, and cloud technologies were the targets of the largest investments in 2021, followed by medical and fintech startups.

Reduction in Training Costs

This year’s Artificial Intelligence Index dismisses the idea that artificial intelligence systems remain expensive to train. Authors from Stanford discovered that the training cost of the basic AI image classification model decreased by 63.6 percent, while the training time for AI systems improved by 96.3 percent.

This report is not the first to claim that costs for certain artificial intelligence development tasks are decreasing, partly due to improvements in hardware and architectural approaches to design. A 2020 study by OpenAI showed that since 2012, the amount of computation required to train a model for the same performance in image classification on the popular benchmark – ImageNet – has decreased by a factor of two every 16 months. However, many state-of-the-art artificial intelligence systems remain prohibitively expensive for all but the best-funded laboratories and training companies, let alone for implementation in production.