CIBC Tech & Innovation Market Update – July 2024

You’ve heard it time and time again, social media use is harmful to our mental health. While this statement is typically offered as more of a passing comment, the U.S. Surgeon General aims to take more serious preventative measures. In an article written in the New York Times, Dr. Vivek H. Murthy outlined a call for a warning label on social media. The proposed warning is specific to adolescent use of social media, an area where several studies have shown that prolonged daily use can have adverse effects on the mental health of youth. While the article has drawn attention, the requirement for a warning label would have to come from Congress in the form of a bill, which we view as unlikely given the upcoming U.S. election.

These days it can be hard to have a conversation about technology that doesn’t revolve around Generative AI. That is particularly true in the Legal Tech space, where LLMs and GenAI have a number of clear use cases, particularly in a research capacity. Major legal research players Thomson Reuters (TRI) and Lexis Nexis have moved quickly to capitalize on the technology, becoming some of the first enterprise tech companies to release GenAI-powered products into the market. However, increased visibility leads to increased scrutiny, and a study conducted by the Stanford Institute for Human-Centered AI (HAI) found that TRI and Lexis’ tools aren’t as accurate as they claim to be. Specifically, the study found that TRI’s Westlaw hallucinated 33% of the time, and Lexis’ hallucinated at a 17% rate. While we do think that the study is somewhat misleading in how it arrived at its results, it does raise important questions about how Gen-AI should be used in a legal setting and what usage will look like as the products evolve and improve.

Canadian AI startup Cohere raised $450 million in funding back in June, in a round that saw both Nvidia and Salesforce both take a larger stake in the startup. While public tech valuations have been declining amid a challenging demand environment, investors are still showing a healthy appetite for funding private AI startups at high valuations. While the private market appears to be flourishing, a long road still lies ahead for AI startups. We also recently wrote about the difficult road ahead for AI startups as the costs of compute power and chips erode hopes of profit, and startups compete with the hyperscalers. Amid this backdrop, we expect few AI IPOs in the near future.