Investors are seeking the next big thing after chatbots, and AI agents are experiencing a "ChatGPT moment."

• AI agents are now gaining popularity among developers as a more powerful tool than ChatGPT, which initiated the growth of generative artificial intelligence.
• Since the launch of ChatGPT, there has been a flood of innovation in the market, as stated by Jared Spataro, Microsoft's corporate vice president of AI at Work, in an interview with CNBC.
• The valuations of companies that create AI agents, like other generative AI startups, have become inflated.

In just one month of use, Klarna's AI agent, powered by OpenAI, handled two-thirds of customer chats and was equivalent to the work of 700 full-time agents.

Echo AI CEO Alexander Kvamme stated on CNBC that Klarna's February announcement could have marked the beginning of AI agents experiencing their "ChatGPT moment."

In late 2022, OpenAI made the ChatGPT chatbot available to the public, showcasing the potential of new generative AI chatbots to provide more comprehensive, imaginative, and conversational answers to online queries compared to traditional search methods, which have been the norm for the past 25 years. As a result, other companies introduced their own competing products.

AI agents are now emerging as the next big trend in the industry, following the rapid advancement from text-based responses to AI-generated visuals such as photos and videos.

AI tools are designed for productivity and task completion, and can make decisions without human intervention, according to Kvamme.

Grace Isford, a partner at venture firm Lux Capital, stated that there has been a "significant surge" in tech investors' interest in startups developing AI agents. These companies have collectively raised hundreds of millions of dollars and experienced a rise in their valuations in tandem with the broader generative AI market.

In 2023, the generative AI industry experienced a significant surge, with $29.1 billion invested in nearly 700 deals, representing a 260% increase in deal value from the previous year, as reported by PitchBook. Meanwhile, the non-AI investing market has been in a prolonged slump for over two years, following a period of record financings during the Covid pandemic.

Early deployments of AI technology are expected in 2024, following the peak hype of AI in 2023.

Since the launch of ChatGPT, Microsoft has experienced a surge of innovation in the market, with Jared Spataro, Microsoft's corporate vice president of AI at Work, stating this to CNBC. Microsoft has invested heavily in generative AI models and products, as well as in the development of ChatGPT, with billions of dollars spent on each.

The term AI agents is not uniformly defined in the tech industry. Experts who spoke to CNBC about the emerging trend generally considered agents to be a more advanced version of chatbots, designed for specific business functions and customizable on large AI models. J.A.R.V.I.S., Tony Stark's multifaceted AI assistant from the Marvel Universe, is an example of an AI agent.

AI agents are advanced generative tools that can perform multistep, complex tasks on behalf of users and generate their own to-do lists, allowing users to avoid having to guide them through each step.

Amplitude's chief product officer, Francois Ajenstat, stated that an assistant not only provides an answer but also automates a sequence of actions.

How Microsoft and Google are playing

Microsoft CEO Satya Nadella stated on an earnings call that he aims to develop an AI agent capable of performing more tasks for users, although there is still "a lot of execution to be done." Similarly, executives from both Microsoft and Google have emphasized their efforts in enhancing AI assistants' productivity.

In May at Google I/O, Google unveiled Project Astra, its latest development in the creation of its AI assistant, which is being developed by Google's DeepMind AI unit.

The demo video of Google's assistant showed how it could assist users in remembering where they left their glasses, reviewing code, and answering questions about an object through video and audio. Although it is currently a prototype, Alphabet CEO Sundar Pichai expressed hope to release it to users later this year.

The demo was held a day after OpenAI demonstrated a comparable audio conversation with ChatGPT, emphasizing its ability to function as a conversationalist, language translator, math tutor, and code co-writer.

At its Build developer conference, Microsoft announced a partnership with Cognition AI, which will make Devin, Cognition's AI agent, available to customers. Devin is marketed as the "first AI software engineer" by Cognition.

Devin's ability to handle multistep processes quickly caused a stir on social media. Unlike other tools that simply generate simple lines of code, Devin creates a problem-solving process, writes the code, tests it, and then ships it.

Cohere's operating chief, Martin Kon, stated that AI agents can perform tasks such as booking a flight, suggesting an interest rate on a loan, and updating customers on arrival times.

Microsoft's GitHub has seen about 46% of its code being generated by AI across all programming languages, as stated by CEO Thomas Dohmke in a blog post in early 2023.

Most experts who spoke with CNBC agree that an AI agent is defined by its ability to go beyond a single use case and become a comprehensive personal assistant.

Chatbots are being developed by anthropic and other startups to interact with external tools and services on behalf of customers.

Microsoft's Spataro described the development of his company's Copilot coding agent as a "rocketship experience." He emphasized that Microsoft is shifting from simple to complex tasks, such as providing a 30-second outlook on a user's calendar to prioritize their day.

Macquarie's head of U.S. AI and software research, Fred Havemeyer, stated in a recent note to investors that the firm anticipates seeing more AI agents.

According to Havemeyer, agentic AI, which can direct itself towards accomplishing tasks, will be the key to unlocking the value of GenAI for everyday users.

Last year, the idea of AI agents gained attention, but it became clear that there was still work necessary to make the tools more self-sufficient, as stated by Romain Huet, OpenAI's head of developer experience, in a conversation with CNBC.

Huet stated that we possess increasingly powerful models that allow us to better capture user intent, but we are still in the early stages of developing agents.

He stated that the major breakthrough will occur when an AI agent can recognize your preferences and act on your behalf without your request.

Startups raise big money

Investors are providing substantial funding to AI agent startups, although these investments are not as large as those received by AI model companies. Despite this, valuations for these startups are still higher than their business fundamentals suggest.

Adept, a company founded by alumni of OpenAI and Google, received a valuation of over $1 billion last year. Its website states that its technology simplifies the complexity of software tools, allowing users to navigate them without difficulty.

In May, H, a French AI agent startup, secured a $220 million seed round from investors such as Amazon, Samsung, and Google ex-CEO Eric Schmidt. Meanwhile, Artisan AI, a Y Combinator-backed startup developing AI agents for enterprise use, has completed a $7.3 million seed round and onboarded over 100 companies.

Jaspar Carmichael-Jack, the founder and CEO of Artisan AI, stated that true AI agents could not be started until 2022 because that was when chatbots like ChatGPT became accessible to the average consumer, allowing them to interact with such tools.

While the VC market is generally down, AI startups are experiencing growth in 2021, according to Carmichael-Jack.

Before co-founding Snorkel AI in 2019, Braden Hancock worked at Facebook Research and Stanford's Artificial Intelligence Lab. He stated that the market for broader AI agents is in a "similar hype cycle" to that of self-driving cars, and it will take a long time for them to hit the mainstream.

Hancock stated that people would only be willing to put something on autopilot if agents were "many times" better. He emphasized that when it comes to technology signing your name and making money transfers, there is a "really high bar."

Imbue, a three-year-old startup founded by Kanjun Qiu, has been valued at over $1 billion with support from Amazon's Alexa Fund and Eric Schmidt. According to Qiu, based on user research conducted by the company, the current portrayal of AI agents as generally intelligent personal assistants that handle delegated tasks does not align with what users truly desire, as they are "not fully trustworthy" by design.

"As CEO, Qiu found it challenging to delegate tasks to his executive assistant, despite having worked with her for two years and being impressed by her abilities. For new tasks, Qiu still struggled to predict the outcome with certainty."

Imbue is creating AI software agents that can be customized for individual needs without coding, allowing users to personalize their experience without requiring training on user data.

Instead of relying on centralized and controlled agents built by companies like OpenAI or Google, Imbue envisions agents that empower users with control.

"Qiu stated that agents can be viewed as empowering individuals to create software by enabling them to write code on their computers and achieve their desired outcomes."

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