Nvidia’s Israel AI spending spree has downside

Nvidia Corp, the AI ​​chip giant, is currently making one of its biggest moves in the past year by completing the acquisition of two Israeli companies for a total of $1 billion. The two startups Run: You have And So there you have it They are considered two of the leading companies in Israel in developing artificial intelligence products, in their respective fields. The acquisition will add 250 employees in Israel to the world's largest artificial intelligence chip maker, while removing from the market two of Israel's most promising companies, which, according to investors close to the companies, could have gone on to raise capital at multi-billion-dollar valuations. dollar.

Run AI, which was acquired for $620 million plus $100 million in retention grants, has developed an operating system for managing graphics processors, and will allow Nvidia's customers — banks, insurance companies and pharmaceutical companies — to train AI models on fewer. Of processors. Instead, it is able to improve the efficiency of any existing processors so that more data can be trained on them.

Unrealized potential

Deci AI is in the early stage of being acquired by Nvidia and the deal is likely to close for an estimated $250-350 million. It is one of only three companies founded in Israel developing large language models (LLMs) – the other two being AI21 from Amnon Shashua and Tabnine, which is developing an MSc in software development. It complements Run:AI by allowing Nvidia customers to “compress” their AI models and run them more efficiently. Deci was founded by Google experts who were frustrated by the high costs of AI processing given the expensive hardware Nvidia markets for this purpose.

To reduce hardware costs, Deci has developed algorithms that replace part of the chip's activity and thus speed up processing power. Initially, the company helped power relatively simple AI applications on end devices like phones and cars, but over time, Deci realized it could develop AI models using the same good algorithms as those of OpenAI and Google, and began training the models itself. . Last year, their models surpassed in many respects those of Meta and the French company Mistral, which recently raised $5 billion in capital.

It could have become Israel's Desi Mistral. Before accepting Nvidia's offer, the company found itself at a crossroads. It could have raised hundreds of millions of dollars as its French competitor Mistral did, become a major supplier of language models and continue to compete with Google and Meta, or rather focus on the commercial side and sell as many models and software as possible. It is possible to develop its trading muscle quickly. But in the end she was lured by Nvidia's offer. Nvidia already has 4,000 employees in Israel with another 250 added to its number from the two startups.

Will we continue to produce large companies?

With the two acquisitions, Nvidia will strengthen its position not only against other chip companies such as Intel and AMD, but also with clients such as Microsoft, Amazon and Google, which provide cloud AI services. This is also good news for Nvidia's development center in Israel, which will become prominent in the field of AI software.

But is there any viability for the Israeli AI industry outside of Nvidia, and will Israel find it difficult to produce large AI companies like France and the UAE? A study released by Stanford University earlier this month presents a bleak picture of Israeli talent in the field. According to the study, negative immigration data in the field of artificial intelligence in Israel ranks second after India, which is considered the largest source of human capital in this field in the world. As part of the research, data was collected from 10,000 LinkedIn users in each country. The weighting is in percentages and ranges from 1, indicating a positive trend, to -1, indicating a negative migration trend.

In countries such as Canada, the weights show a positive trend for immigration of 0.96, and 0.4 in the United States. In the UAE, where authorities pay capital to attract talent, a positive migration trend of 1.48 was recorded. On the other hand, the trend in Israel is negative 0.57, which is second only to India with a negative immigration AI of 0.76.

Despite the worrying trend, AI investors in Israel remain optimistic. “We know that Israel has the highest number of AI experts per capita,” says co-founder and general partner of AI VC Fund Disruptive AI. Juray Weinmesser. “If you count the number of people in positions that mention AI skills on LinkedIn, you come out to about 15,000 people.”

Regarding brain drain, Weinmesser says it happens mainly in senior positions. “For PhD students, for example, the options abroad are very attractive, even more so than what awaits them in Israel,” he explains. “There are huge companies doing important research. Many of these minds may not have left the country.” But working here in the local branches of tech giants, if someone works at Nvidia, and we put the local contribution aside, in the end they are contributing to a company that is not Israeli.”

“The state must invest.”

“The war has accelerated the headhunting process by global companies for Israelis in this field,” says Eyal Solomon, CEO of the technology recruitment firm. “During it, it has been revealed how strong Israelis are in a variety of specialties, such as missiles, drones and precision intelligence.” “. Circles.” Looking to the future, Solomon sees the brain drain continuing through two main ways: startups serving the needs of giant corporations, as well as by attracting select employees to relocation programs.

Omri Green, managing partner of Dell Technologies Capital, draws optimism from Nvidia's two acquisitions. “The fact that Nvidia is strengthening its Israeli development center in high-level software and hiring another 250 employees is actually good news for the AI ​​industry in Israel,” he says. “Although the startups will not grow independently, they will grow internally.” . NVIDIA's global reach is a whole greater than the sum of its parts, because it's not value that matters, it's revenue. I'm not worried about the sector because of the takeovers that are happening here. The state’s role is to continue and build departments and laboratories that will produce the next artificial intelligence researchers.”

In the summer of 2022, the government's National Plan for AI was unveiled by then-Minister of Innovation and Technology Orit Farkash-Hacohen. The plan has reportedly been allocated a budget of NIS 2 billion to boost research, human capital and create infrastructure to ensure Israel's technological leadership, along with implementing artificial intelligence in government to improve public sector services.

AI21 Labs Co-Founder and CEO Professor Uri Shoham has been appointed Chairman of the Scientific Committee of the National Artificial Intelligence Programme. “It's not a big budget,” he told Globes last June. “We're not going to be able to do what everyone else in the world is doing. That's why we have to be smart, and focus our activities on things that will help us.” Shine the spotlight on us.” He added that the government “will have to set its priorities.”

Published by Globes, Israel Business News – en.globes.co.il – on April 30, 2024.

© Copyright Globes Publisher Itonut (1983) Ltd., 2024.