Artificial intelligence (AI) startups navigated a tumultuous landscape in 2023, marked by widespread experimentation with AI tools, fundraising at 2021 valuations, notable closures, and headline-grabbing controversies involving figures like Sam Altman and OpenAI. The legal tussle between the New York Times and OpenAI added a dramatic finale to the year. With this tumultuous period in hindsight, predicting the trajectory of AI startups in 2024 becomes a challenging task. However, seasoned investors, known for their ability to make insightful predictions, shared their perspectives with TechCrunch+ in a recent inquiry.

Over 40 investors participated in the discussion, expressing expectations of continued funding momentum in the AI sector. Despite the optimism, a prevailing sentiment among these investors was that the industry is gradually moving beyond its initial hype cycle. Anticipating a shift towards more sustainable businesses, these stakeholders foresee the emergence of a second wave of AI startups in 2024. This next wave is expected to be characterized by greater specialization, focusing on specific industry sectors and distancing itself from the practice of building layers on existing technologies from major players such as OpenAI and Google.

Lisa Wu, a partner at Norwest Venture Partners, emphasized the attractiveness of opportunities in verticalized AI in the coming year. She highlighted the potential lower risk associated with investing in startups that concentrate on specific sectors, as these ventures may be less prone to replication by established companies like Microsoft and Google. Wu cited examples like law firms, suggesting that AI applications deeply integrated into end-user workflows, armed with industry-specific training data, could enhance productivity, reduce costs, and improve outcomes in sectors like litigation. As 2024 unfolds, the AI investment landscape appears poised for evolution, with investors cautiously optimistic about the industry's maturation and the emergence of more focused, specialized startups