Generative AI made a huge impact in November 2022 with the launch of OpenAI's ChatGPT, quickly attracting 100 million users. Sam Altman, OpenAI's CEO, gained widespread recognition. Numerous companies, including OpenAI, competed to create superior AI systems, with OpenAI aiming to surpass its flagship model, GPT-4, released in March 2023, with an anticipated GPT-5. Nearly every business raced to integrate ChatGPT or similar technologies from competitors into their operations. However, there's a major issue: Generative AI isn't highly effective and may never be. At its core, generative AI functions like an advanced autocomplete, excelling at predicting plausible-sounding responses but lacking deeper comprehension and fact-checking abilities. This limitation has resulted in significant issues with "hallucination, " where the AI confidently states incorrect information and makes basic errors in subjects like arithmetic and science. The military phrase "frequently wrong, never in doubt" captures this well. Such systems, while impressive in demonstrations, often fall short as reliable products. If 2023 was marked by AI hype, 2024 has seen growing disillusionment.

What I suggested in August 2023—that generative AI might be a letdown—has gained more acceptance. Profits are lacking; OpenAI's estimated operating loss may hit $5 billion in 2024, and its over $80 billion valuation seems misaligned with these losses. Many users find ChatGPT doesn't meet the extremely high expectations it initially set. Additionally, most big companies follow similar approaches, developing larger language models without significant improvements beyond GPT-4. This means no single company has a competitive edge ("moat")—leading to diminishing profits. OpenAI has already slashed prices, and Meta is offering similar tech for free. Currently, OpenAI is showcasing but not releasing new products. Without a groundbreaking advancement like GPT-5 by the end of 2025, notably better than rivals, the excitement surrounding OpenAI will fade. As OpenAI embodies this field, the entire industry might collapse.