While markets have recouped much of their losses from the early part of the week, one of the triggers for the initial shock was a reassessment of the likely timescale of financial returns on generative AI investments, which is set to have longer-term consequences, she said.
After two rollercoaster years that drove anticipation of returns sky-high, triggering massive valuations for AI-linked stocks, expectations are starting to be reined in.
“Investors are reviewing their AI expectations and that is a good thing for Ireland because it means less pressure to drive returns quickly, which translates into a more considered investing pattern,” Ms Young said.
An early, large and somewhat frothy round of AI-driven venture capital investment in the wake of the ChatGPT launch in 2022 skewed heavily to US start-ups and was dominated by Silicon Valley’s ‘big tech’ echo system, she said.
That reflected a dash among some investors into a space they hoped to generate big and rapid returns.
Investors still see huge potential in AI but the speed of anticipated return on investment is seen by many to be slower than initially hoped.
“A more considered, slower send – spread across a longer period – should be a good thing, including for Ireland,” Ms Young said.
The new EU Artificial Intelligence Act, a law that sets out rules for emerging AI technologies that came into force this week, coupled with the established GDPR privacy regime, means Ireland benefits from a clear regulatory framework to underpin investment, she said.
While many in Silicon Valley have traditionally baulked at the regulation of new and emerging technologies, AI has proved an exception with widespread acceptance in the industry of a need for controls.
Meanwhile, slower and more disciplined investment is likely to be more sustainable, she said.
It also means investors including corporate managers are seeking greater detail on the use case for technology before committing capital into a space where a lot of data on how good models really are is still missing, she said.
A more moderated investment environment will also give Ireland more time to upskill the workforce.
Reduced AI valuations will also broaden the pool of potential buyers for technology, a market that had risked being cornered by cashed-up big tech firms and venture capital crowding out industrial players, including so-called ‘acqui-hires’ – buying start-ups for their staff and talent rather than for their products or business case.
As the investment pool becomes more differentiated, there will be scope for some start-up businesses to command niche premiums, including in sectors like autonomous driving selling to established car manufacturers.
“Corporate buyers might pay a strategic premium if the case stacks up to buy technology, including for internal transformation,” Ms Young said.
