Deutsche Bank

Research

Global Strategy Date

25 May 2023
Thematic Research

AI in action: where is the smart money

going?
Marion Laboure, Ph.D.
n Artificial intelligence is an overnight success that has been many years in
Research Analyst
the making. To properly anticipate what AI innovation is to come next, we
+44-207-545-0679
went back to the source, looking at patents and venture capital deal activity
that will translate into the everyday AI applications of the future. Cassidy Ainsworth-Grace
Research Analyst
n We collected 175,072 published AI patent entries from 2012 to 2022 across +44-207-547-0142
193 WIPO members, broken down into five broad categories. For venture
capital investment, we used the OECD.AI database covering 24,310 deals
across 92 economies from 2012 to 2022.
n In absolute terms, venture capital activity and patents in AI have surged
since 2012. The number of venture capital deals multiplied over ten times
to 3,884 and the value of deals in 2022 was almost 50 times higher than in
2012, at $83bn. At the same time, the number of AI patents increased seven
times to almost 37,000 in 2022.
n More than two thirds of AI innovation over the past decade, as captured by
both venture capital deals and patents, has been concentrated in sectoral
applications such as transportation, industrial and consumer uses.
n Looking at what’s next, we expect generative audio to arrive by 2024 at
scale and disrupt industries like gaming and film production.

Figure 1: Before today, had you heard of ChatGPT? Figure 2: My current place of employment...
Yes, I had No, I had not are already heavy users of ChatGPT are only staring to use ChatGPT
100% are starting to discuss using ChatGPT but have not used it yet have not spoken about ChatGPT

Don't know
100%
80%

80%

60%
60%

40%
40%

20% 20%

0%
0% USA United Kingdom France Germany Italy Spain
France Spain Germany Italy USA United Kingdom

Source : Deutsche Bank, dbDIG. Source : Deutsche Bank, dbDIG.

Deutsche Bank AG
IMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P)
097/10/2022. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE
SEE APPENDIX 1 FOR FURTHER DETAILS.

7T2se3r0Ot6kwoPa
25 May 2023
Thematic Research

AI out of hibernation
With the release of OpenAI’s ChatGPT in November 2022, interest in AI has
exploded, not only for the everyday person, but corporates as well. The number
of mentions of “artificial intelligence” in corporate documents reached over
715,000 in 2022, compared to 135,000 in 2020.1 And, according to our proprietary
survey, 41% of Americans had already heard of ChatGPT by April 2023, whilst
nearly 60% said their workplaces have in some form or another started to use
ChatGPT.

Figure 3: Number of corporate documents mentioning Figure 4: Google Trends on artificial intelligence and
artificial intelligence* ChatGPT
800,000
100 May 2023: Google releases
new generative AI tools.
700,000

80
600,000 Mar 2023: OpenAI
releases ChatGPT-4.
500,000
60
Nov 2022: ChatGPT
400,000 launched by OpenAI.
Artificial intelligence
300,000 40 (topic)

ChatGPT (term)
Jan 2023: Microsoft
200,000 reports new
20 investment in OpenAI.
100,000

0 0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Jan 2022 Mar 2022 May 2022 Jul 2022 Sep 2022 Nov 2022 Jan 2023 Mar 2023

Source : Deutsche Bank, AlphaSense. *Artificial intelligence as defined by the OECD.AI. Source : Deutsche Bank, Google Trends.

Additionally, in recent news, ChatGPT is now available on iPhone after launching its
first app version on May 18 in the US App Store. Google also announced on May 5
that it would begin rolling out generative AI tools integrated into its Google search
product. Before going any further, a quick definition – AI is a machine-based system
that can, for a given set of objectives typically defined by a human, make
predictions, recommendations or even decisions that in turn may influence real or
virtual environments.2

These new developments in AI have been brewing for several years. Venture
capital deal activity and published patents related to AI have been quietly surging
since 2012. For example, the number of VC deals has grown from 332 in 2012 to
3,884 in 2022. Deal value hit $83bn in 2022, up from $1.8bn in 2012. In the same
vein, the number of patents published on artificial intelligence has increased seven
times since 2012.

Barriers to entry have been falling, spurring commercial innovation. For example,
the cost to train an image classification system has decreased by 64% since 2018,
while training times have improved by 94%. A variety of new startups and VC
recipients have also emerged on the scene, including OpenAI, Anthropic, Stability
AI, A121 Labs, Midjourney and Cohere. Anthropic has recently raised a reported
$450mn in its Series C funding, with participation from Alphabet, Salesforce and
Zoom. Builder.ai, an AI company in London, raised a reported $250mn in its latest
funding round.

To properly anticipate what AI innovation is now arriving and soon to arrive in the
metaphorical store front, we looked at patents and VC deal activity in this field. We
estimate that it takes firms receiving VC funding roughly two to three years after the

1 When using the OECD.AI's definition of AI.

2 As defined by the OECD.

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deal to have their product ready for market, or if the product is riding a longer-term
trend or requires patent approval, then seven to ten years.3 In terms of patents, after
a firm secures its protection after patent publication, they will need to begin,
marketing, selecting commercial partners, acquiring license agreements and
product commercialisation.4 This will roughly take one to three years.

Using the World Intellectual Property Organisation’s (WIPO) Patentscope tool,

we collected 175,072 published AI patent entries from 2012 to 2022 across 193
WIPO members, broken down into five broad categories: (i) sectoral applications;
(ii) horizontal platforms; (iii) autonomous machines; (iv) semiconductors; (v)
emerging tech.5 For VC and investment activity, we used the OECD.AI database
covering 24,310 deals across 92 economies.

1. The AI landscape - bringing ideas to life

1.1 On the surface - how has the share market reacted
Share prices surged for companies that quickly incorporated ChatGPT and other
new AI capabilities. For example, on 31 January 2023, C3.ai, an AI software
company, announced its Generative AI Product Suite that integrates AI capabilities
such as OpenAI, Google and academic research. On the same day, the share price
rose nearly 22%, and prices are now up 143% since the beginning of the year.
SoundHound, an AI audio and speech recognition software, has seen shares climb
66% year-to-date. And it is not just AI software companies, as the surge affects
companies along the value chain. NVIDIA, a semiconductor company that
produces computer chips powerful enough to run AI models, has seen its share
price climb 110%. Meta has also strongly outperformed, having announced it was
looking to release a new LLM to researchers in government, civil society and
academia on February 24 amid the AI race between Big Tech companies.6 While
share prices are surging, global VC investment into AI fell in Q1 2023, although AI
investments in Silicon Valley rebounded.

3 As surveyed by Pear.VC. Approval for VC funding takes two to 20 weeks. However, securing the funding
may take up to six months, depending on the industry. VCs typically want to see market size estimates
five years after the deal is initially struck, unless the company’s product is riding a longer-term trend or
requires patent approval, then seven to ten years. This suggests that the recipient firm should generally
have their product ready for market roughly two to three years after the deal but can be up to ten
depending on the product.
4 According to the US Patent and Trademark Office it takes about 22 months to get approval and
publication after filing for a patent. Although there is a one-year grace period to allow for market
research after filing an initial application, full products stemming from the patent are typically not
shipped at scale due to legal concerns.
5 Our search deliberately excludes the technique of ‘machine learning’. Our patents database runs from

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Figure 5: Returns* for AI exposed top performing firms, 2023 YTD

Software Semiconductors Hardware Media Services

160
143
140
124
120 110 105
104
100
80 66 67
56
60
39 37
40 31 32 27 27
26 24 21
20 Total return
20
for the S&P
0

Samsung
C3.ai Inc

Microstrategy Inc.

Microsoft Corp

Quadient SA

Fair Isaac
Salfesforce Inc.

Western Digital Corp

Netflix Inc
Nvidia Corp

Metaage Corp

Apple Inc

Meta Platforms Inc

Capgemini SE

Amazon.com Inc
Advanced Micro Devices

Marvell Technology Inc.

Soundhound AI Inc.

Source : Deutsche Bank, Bloomberg Finance LP. *Total return accounts for both income (interest or dividends) and capital appreciation. *Updated 23 May 2023.

1.2 But the money has been moving to AI for some time
Worldwide venture capital investment in AI hit a peak of $83bn in 2022, up from
$1.8bn in 2012. Indeed, Databricks and MIT found most CFOs have begun
widespread AI deployments. In their sample, the share of companies not using AI
in 2022 was less than 6%.

Figure 6: CIO's current and expected rate of widespread AI usage by core business function
80% 2022 2025

60%

40%

20%

0%
IT Finance Supply chain and Product HR Marketing and Sales
manufacturing development advertising

Source : Deutsche Bank, Databricks.

1.3 Companies are now set to benefit from the explosion of AI

innovation
Research is now being deployed in the commercial world after many years of
being contained to academia. Academia is the first mover: there is generally a 15-
year lag from publication to patent.

1990 to 2022, but we took from 2012 to harmonise with VC deals.

6 In its latest earnings report. Meta made it clear that it was shifting focus to artificial intelligence, with
capital expenditures to build out AI capacity to be in the range of $30 to $33bn.

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However, it is becoming increasingly clear that the time is ripe for an explosion
of AI innovation. 49% of the VC deals from 2012 to 2022 were struck in the last three
years. Similarly, 52% of AI-related patents in our database have been published in
the three years. With the pipeline to market generally two to three years for VC and
one to three years for patents, we are poised for the arrival of a wave of AI
innovation.

Figure 7: Number of AI-related patents published by year Figure 8: Number of deals and deal value of AI-related VC
investment
40,000 5,000 $160,000

35,000

4,000
Deal value ($mn; rhs)
30,000
$120,000

Number of investments (lhs)

25,000 3,000

$80,000
20,000

2,000
15,000

$40,000
10,000
1,000

5,000

0 $0
0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source : Deutsche Bank, World Intellectual Property Organization. Source : Deutsche Bank, OECD.AI.

2. Applications: AI will now become mainstream throughout

2023
“We are now solving problems with machine learning and artificial intelligence that
were… in the realm of science fiction for the last several decades.”

Jeff Bezos, Founder and Executive Chairman of Amazon.

Nearly four-fifths of AI-related VC deals made over the past decade have been in
sectoral applications. A further 8% occurred in autonomous machines and
vehicles, and the remaining 13% in the semiconductor space. The proportion for
AI-related patents is similar. Just under two-thirds of patents in our database have
been published under the umbrella of sectoral applications. A further 19% of
patents were for technology solutions stretching horizontally across sectors, such
as developer tools and computer vision; 16% for autonomous machines and
vehicles; and the last 4% for semiconductors.

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Figure 9: Total number of published patents by category

Sectoral applications Horizontal applications Autonomous machines Semiconductors

35,000

30,000

25,000
Number of patents

20,000

15,000

10,000

5,000

0
Industrial Consumer Transportation Healthcare Information Financial AI automation AI core Computer vision Natural language Robotics Autonomous Edge AI software Intelligent Processor design
technology services platforms processing vehicles devices

Source : Deutsche Bank, World Intellectual Property Organization.

Figure 10: Number of AI-related VC deals 2012-2022 Figure 11:AI-related patents published 2012-2022

4%
13%
16%

8%
Vertical applications
Sectoral applications Horizontal platforms

Autonomous machines Autonomous machines

Semiconductors
Semiconductors 19%
61%

79%

Source :Deutsche Bank, OECD.AI. Source : Deutsche Bank, World Intellectual Property Organization.

2.1 Sectoral applications: AI is not bound to one sector

Right now, 79% of VC deals and 61% of patents are occurring in what we consider
‘sectoral applications’. Under our definition, this includes (i) consumer; (ii)
industrial; (iii) information technology; (iv) transportation; (v) healthcare; and (vi)
financial services sectors.

From 2012 to 2022, the number of VC deals has increased from 270 to 3,006, more
than a tenfold increase. In 2022, the total deal value hit $62bn, up from $1.3bn in
2012. And patents published within these sectors has also been booming. The
number of patents being published under the sectoral applications umbrella has
increased six-fold since 2012. Despite covering a broad range of applications, the
companies holding the most patents are well-recognised technology incumbents,
the likes of IBM, Samsung, Intel, LG Electronics and Qualcomm.

Allocation of VC investment and patent activity differed across these six sectors.
Firstly, VC deals have been concentrated in AI in healthcare, information
technology and financial services. The use of AI in healthcare involves improving

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medicine and the provision of care.7 This is to be leveraged across product

categories that include AI-based drug discovery, clinical decision support, genetic
analytics, healthcare administration, and personal health. In the EU, the European
Commission estimated that smart health -- the use of AI in healthcare --- will have
a cumulative impact equivalent to €105bn by 2030.

AI in information technology (IT) includes enterprise software tools that optimise

functions typically administered by IT departments.8 In financial services, AI
technologies are embedded into existing financial services via advanced analytics,
process automation, robo-advisers and self-learning programs.9

On the other hand, patent activity under the sectoral application umbrella has
largely been occurring in the industrials, consumer, and transportation sectors.
The use of AI in the industrials sector typically involve technologies that automate
industrial processes and unlock industrial data to find new efficiencies.10 In the EU,
the European Commission estimated that AI used in manufacturing and the
industrial internet of things will have a cumulative impact equivalent to €200bn by
2030. Next, consumer AI has affected business from their very business models to
their individual product categories such as media, advertising, gaming,
education.11 It also has great relevance to what you see on the consumer side like
intelligence price optimisation and e-commerce recommendation engines.

In transportation, AI can assist with logistics like intelligent fleet management.12

We have already seen such products on the market, such as WiseTech Global,
which uses software automation to improve the efficiency of shipping logistics. It
acquired Shipamax, which uses AI to convert unclean and unstructured data, such
as in PDFs, into machine-readable formats. Automobiles have also employed AI
assistance for the everyday driver for several years, such as parking assistance and
cruise control.

Figure 12: Number of AI-related patents in sectoral Figure 13: Number of deals and deal value of AI-related VC
applications investment in sectoral applications
25,000 $100,000 4,000

$90,000
3,500

20,000 $80,000
Consumer Industrial Transportation
Deal value ($M, lhs) Deal count (rhs) 3,000
$70,000

Healthcare Information technology Financial services 2,500

15,000 $60,000

$50,000 2,000

10,000 $40,000
1,500

$30,000
1,000
5,000 $20,000

500
$10,000

0 $0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source : Deutsche Bank, World Intellectual Property Organization. Source : Deutsche Bank, OECD.AI.

2.2 Horizontal platforms: the AI toolkit

We have seen the number of patents in the category of horizontal platforms rise

7 Within the sectoral applications category, healthcare makes up 28% of VC deals.

8 Within the sectoral applications category, information technology makes up 36% of VC deals.
9 Within the sectoral applications category, financial services make up 15% of VC deals.
10 Within the sectoral applications category, industrial makes up 32% of patents.
11 Within the sectoral applications category, consumer makes up 30% of patents
12 Within the sectoral applications category, transportation makes up 26% of patents.

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nearly six-fold since 2012. 13 Horizontal platforms, representing nearly a fifth of

total AI-related patents in our database, includes (i) AI core; (ii) natural language
technology; (iii) AI automation platforms; and (iv) computer vision software.
Horizontal applications are the building blocks of AI development and deployment,
needed to build and deploy AI models. In effect, developments in these fields
enhance the AI toolkit for firms across all sectors. Key companies holding patents
in this category include AT&T, IBM, LG Electronics, Baidu as well as the technology-
sector incumbents.

AI core can be considered the foundations of AI deployments and includes the

developer tools needed to build and deploy models to production. AI automation is
the software and services that enable firms to leverage AI to automate their critical
business processes. This technology is the one that the average employee will more
likely interact with day to day, and is focused on low-order, repetitive tasks.

Figure 14: Number of AI-related patents in horizontal applications

7,000

6,000
Natural language processing AI automation platforms
5,000
Computer vision AI core

4,000

3,000

2,000

1,000

0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source : Deutsche Bank, World Intellectual Property Organization.

Natural language processing is an AI tool used in the large-language models (LLMs)

that have become popular with the advent of ChatGPT. This technique uses
computational linguistic techniques to ‘learn’ from communications data, both
written and oral, and make predictions about the structure and content of language.
Some examples of natural language processing include translation, autocorrect,
automatic text summarising, chatbots and, in finance, processes such as requests
for information.

Computer vision involves the use of AI to analyse visual data and make meaningful
predictions about the physical world and digital images. It is not solely generative
but utilises visual data to make inferences upon which it can build. Examples
include facial recognition, geospatial analysis and visual data labelling software.
Microsoft’s Inner Eye technology has helped detect tumours and abnormal cells. In
their latest research, Microsoft demonstrated how its technology has enabled
clinicians to perform radiotherapy planning 13 times faster. Two of the five
companies with the greatest number of computer vision patents are Chinese: Baidu
and Huawei.

13 The proportion is similar for VC deal count, but this data is not available for publication.

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2.3 Who even needs a driver's licence anymore? Autonomous machines

have arrived

Figure 15: Number of AI-related patents published in Figure 16: Number of deals and deal value of AI-related VC
autonomous machines investment in autonomous machines
7,000 $45,000 450

$40,000 400
6,000

$35,000 350
Deal value ($mn; lhs) Deal count (rhs)
5,000
Autonomous vehicles Robotics $30,000 300

4,000
$25,000 250

3,000 $20,000 200

$15,000 150
2,000
$10,000 100
1,000
$5,000 50

0 $0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source : Deutsche Bank, World Intellectual Property Organization. Source : Deutsche Bank, OECD.AI. Note: For VC investment, we took the 'Mobility and autonomous
vehicles' as defined by the OECD.AI.

8% of VC deals and 16% of patents in the last decade have occurred in

‘autonomous machines’. This category of technology covers two key areas: (i)
autonomous vehicles; and (ii) intelligent robots. This sector has received a lot of
attention over the last decade. Much of this coincided with the success of Tesla,
which has been experimenting on autonomous vehicle systems, creating Autopilot
and Self-Driving features that rely on highly advanced cameras and neural net
processing.14

From 2012 to 2022, the number of VC deals in autonomous machines increased

from 22 to 363. In 2022, the total deal value hit $11.7bn, up from $0.2bn in 2012.
Similarly, the number of patents being published has surged seventeen-fold
since 2012.

Intelligent robotics falls within this category. These are the robots that are able to
operate to an extent without the need for human intervention and input. AI is
typically used to assist in the training and adaption of robots. It also includes
software, such as operating systems for autonomous robots. Companies like
Samsung, LG Electronics, Intel, and Chinese companies SZ DJI and Beijing Didi
Infinity Tech have a strong foothold with robotics patents. Autonomous vehicles
have also been a point of discussion for several years, and it is likely that this steep
increase in both VC and patents comes as other companies, aside from Tesla
expand their research and investment into the technology necessary for self-driving
cars.

2.4 Counting up the semiconductor chips

“It’s very clear that AI is going to impact every industry. I think that every nation needs
to make sure that AI is a part of their national strategy. Every country will be
impacted.” Jensen Huang, CEO of Nvidia.

14 Tesla have postponed their release of self-driving cars several times, with the most recent being from
2022 to 2023.

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Figure 17: Number of AI-related patents published in Figure 18: Number of deals and deal value of AI-related VC
semiconductors investment in semiconductors
$20,000 700
1,800

$18,000
1,600
600
$16,000
1,400

$14,000 500
1,200 Intelligent devices Processor design Edge AI software Deal value ($mn; lhs) Deal count (rhs)

$12,000
400
1,000
$10,000

800 300
$8,000

600
$6,000 200

400
$4,000
100
200 $2,000

0 $0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source : Deutsche Bank, World Intellectual Property Organization. Source : Deutsche Bank, OECD.AI. Note: For VC investment, we took the 'Robots, sensors and IT hardware
category' as defined by the OECD.AI.

Semiconductors represent 13% of AI-related VC deals and 4% of published

patents. We divided the semiconductors category further into the subcategories of
(i) processor design; (ii) edge AI software; and (iii) intelligent sensors & devices.

From 2012 to 2022, the number of VC deals in semiconductors increased from 40

to 515. In 2022, the total deal value hit $9.4bn, up from $0.2bn in 2012. Similarly,
the number of patents being published has rose seven-fold from 2012 to 2022.

As we explain in US-China on semiconductor chips: 10 slides on an unprecedented

situation (link), chips have seen rapid innovation since the 1970s, with performance
doubling every few years in line with Moore’s law. Producers must keep up with the
pace of advancement, or will be at risk of being left behind, and as technology
becomes more sophisticated, new tools are necessary. This is where AI can come
in to play.

The use of AI in the creation of computer chips, otherwise known as processor

design, assist in generating efficiency and speed. Innovations in this sub-category
have included low-precision calculations to reduce transistor count. As we
discussed (link), much of the upstream design segment of the supply chain is done
in the US. In contrast, China dominates assembly, packaging, and testing. It has
made little headway in processor design, the higher value-added segment of the
supply chain.

Edge AI technology uses compression algorithms that optimise AI models to be

deployed in semiconductor environments and edge devices. A final subcategory in
this segment is intelligent sensors & devices. These are the devices we see most
often in our day-to-day lives, such as smart thermometers and alarms. They often
measure specific parameters in real-world conditions such as environmental
conditions, motion, images, and chemical levels.

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3. Emerging opportunities: 2024 and beyond

3.1 Listen closely - generative audio may be the next big hit
Figure 19: Number of corporate documents mentioning 'generative audio'
3,500 16

3,000 14

12
2,500
10
2,000 Total mentions (lhs) Trend Score (rhs)
8
1,500
6
1,000
4

500 2

0 0
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023

Source : Deutsche Bank, AlphaSense.

Thanks to generative audio, AI is now able to create a human’s voice and

synthetic audio based on a text input, in different languages, accents and
dialects. It uses the generative AI that became popular with ChatGPT. Some
examples of recently published patents include the recreation of the sound quality
of an audience location in a performance space, and the dynamic generation and
modulation of music based on the reaction of players in a game. From Q1 2020 to
Q4 2022, the number of corporate documents mentioning ‘generative audio’
increased over thirteen-fold.

We will likely see an explosion of new competitors as music and sound

development becomes democratised. Anyone will soon be able to input text or an
image to generate the audio content for their gaming product without needing an
audio specialist or a computer scientist. Critically, these new technologies are not
resource constrained in the same way that voice actors and musicians are.

This will likely impact a range of sectors like gaming, communications, music,
news, and healthcare. Companies holding the greatest number of patents related
to generative audio include Sony, Amazon, Huawei, Bytedance, Adobe, Apple and
Tencent.

3.2 Going deep on generative audio - what audio is even being

generated?
Generative audio comes in four main categories: (i) synthetic voice; (ii) speech
interaction; (iii) music generation; and (iv) audio editing. Firstly, using deep
learning, an AI can synthesise a real human voice, all its pitches, tones and pace, at
high quality. Microsoft can already replicate anyone else’s voice from a three-
second clip. Google produces 380 different human voices in over 50 languages and
variants through its machine learning technology. In a similar way, speech
interaction utilises technology like a virtual assistant, for example Apple’s Siri and
Amazon’s Alexa. As technology develops, it is likely that there will be increasingly
‘natural’ interactions with AI.

Music generation technology can already create new music of significant variety,
whether that be instrumental or rudimentary singing, with ease. Examples include
Spotify’s DJ and Aimi Studio. AI-generated music has already challenged the music
industry. Spotify reportedly removed 7% of the songs uploaded by AI startup

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Boomy due to suspicions of ‘artificial streaming’, whereby online bots inflate listens
for certain songs. In contrast, Universal Music Group NV announced on May 23 it
would partner with AI startup Endel to design AI-generated soundscapes, relying
on Universals' current catalogue of music, as reported by Bloomberg.

Finally, audio editing uses AI to improve audio recording quality. For example, the
use of AI to enhance audio quality during low-quality connection conditions. Adobe
Podcast has already put this technology into practice, whereby its Enhance Speech
capabilities sharpen voice frequencies to sound as if they were recorded in a
podcasting studio.

Figure 20: Number of AI-related patents published in generative audio

300

250

Audio editing Music generation Speech interaction

200

150 Synthetic speech Generative audio

100

50

0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source : Deutsche Bank, World Intellectual Property Organization.

The machine thinking method is here

“Once the machine thinking method had started, it would not take long to outstrip our
feeble powers. At some stage therefore we should have to expect the machines to
take control.” Alan Turing 1951, founding father of modern artificial intelligence.

AI is here, and new innovation is on our doorsteps. Innovation in artificial

intelligence, measured by the leading indicators of patents and venture capital
investment, has exploded over the past decade. The number of VC deals, which
usually have a two to three-year lead time to production, rose more than tenfold to
3,884 in 2022, reaching a cumulative 24,310 over the decade. The value of those
deals soared from almost $1.8bn in 2012 to $83bn in 2022. Published patents,
which tend to roughly have a one to three years lead-time to production, grew
seven-fold, from 4,316 in 2012 to 32,800 in 2022. More than two thirds of AI
innovation over the past decade, as captured by both VC activity and patents, has
been concentrated in sectoral applications such as transportation, industrial and
consumer uses. This is followed by horizontal applications, autonomous machines,
and then semiconductors.

Beyond 2023, we anticipate an upswell in generative audio innovation. We have

already seen generative text and images catch the attention of the world with the
arrival of ChatGPT and DALL-E. Together, these technologies will transform
industries like gaming and film production.

However, there must be a careful consideration of the potential challenges. The

incredible amount of computational power needed to train a LLM may see market

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share concentrated in the hands of a few large technology players. The

computational capabilities required to train modern machine learning systems has
multiplied hundreds of thousands of times despite algorithmic and software
improvements. It can cost $100mn in energy to train nodes on the scale of OpenAI’s
LLMs. The cost barriers will prevent all but the likes of Microsoft, Google and
Facebook from creating the most significant LLMs. Consequently, inaccurate data
and a lack of transparency may cascade across companies that use the APIs.

Most countries have yet to impose significant regulation on AI, exposing firms to
regulatory risk. The work is underway in some, like the EU, which has been working
on harmonised rules since 2021. Final approval for the AI Act is expected by the end
of the year or early 2024. Some countries have already reacted to the launch of
ChatGPT, with Italy banning it in April, citing privacy concerns. In the US, regulation
has not yet been drafted, but the Biden adminstration has begun seeking public
comments on accountability measures.15 Key technology industry leaders,
including Elon Musk and Steve Wozniak, signed an open letter with the Future of
Life Institute calling for a pause in the development of AI more powerful than
ChatGPT to ensure AI innovation is ethical.

As we become increasingly reliant on digital systems, we must keep up with the

development of hacker technology. There are two main types of AI attack: (i) an
input attack, which manipulates what is fed into the AI; and (ii) poisoning attacks,
which involves corrupting the process through which the AI is created. In the same
vein, cyberattacks will likely increasingly involve the use of AI, overwhelming
existing system capacity. 81% of respondents to the WEF’s survey on cybersecurity
stated that “staying ahead of attackers is a constant battle and the cost
unsustainable,” up from 69% in 2020. As mentioned above, technologies already
exist, such as Microsoft’s, that can replicate anyone’s voice very effectively just
from a 3 second clip, increasing the risk of identity theft and fraud. With these
concerns mounting, US President Biden met key stakeholders in the development
of AI on May 4. $140mn was set aside for a new National AI Research Institute to
advance AI R&D in cybersecurity. 16

15 In the near-term, there will likely be growing concern of the peculiar legality surrounding AIs inventing
by themselves. This year, the US supreme court ruled that only “natural persons” and not an artificial
intelligence system, can be awarded patents. Yet as AI becomes increasingly sophisticated, there is a
possibility no single person can claim to have ‘complete conception’.
16 As well as climate, agriculture, energy, public health and education.

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Appendix

Figure 21: Definition of sectoral applications

Number of Published Patents (Change VC Deal Value ($mns, 2012-
Sectoral applications Definitions VC Deal Count
from 2012 to 2022)
Financial services The embedding of AI technologies into existing financial services such as the use of advanced analytics, process 1272
automation and robo-advisors. (231% )
Healthcare Includes technologies that leverage AI to improve medicine and health care provision. Product categories range
6532
from AI-based drug discovery, clinical decision support, genetic analytics, healthcare administration, and personal
(386%)
health.
Consumer
Technologies that enhance business-to-consumer models that range from media & entertainment, advertising
31355
technology, gaming, e-commerce recommendation engines, education technology and intelligent price
(419% )
optimisation.
304,278 19,178
Industrial The use of AI to automate industrial processes and utilise industrial data to find new efficiencies such as crop
33570
maximisation, energy grid automation, geospatial analysis, heavy industry automation, and supply chain
(755% )
optimisation.
Information technology AI used to optimize specific functions typically administered by IT departments, both back-end and front-end use
5185
cases. Product categories include human resource automation, IT infrastructure management, legal automation,
(702% )
property technology and software development tools.
Transportation This can include the management of an intelligent fleet as well as driver assistance. The category does excludes 27620
autonomous vehicles. (682% )

Source : Deutsche Bank, World Intellectual Property Organization, OCED.AI.

Figure 22: Definition of horizontal applications

Number of Published Patents (Change VC Deal Value ($mns, 2012-
Horizontal applications Definitions VC Deal Count
from 2012 to 2022)
AI core
The building blocks for the deployment of AI, and it includes the developer tools that are needed to build and 10076
deploy AI models to end production. (622% )
Computer vision
Use of visual data to make meaningful predictions about both the physical world and digital images, and can 6340
include AI-enabled augmented reality, facial recognition, geospatial analysis, and visual data labeling software. (1237 %)
NA NA
Natural language processing
This involves the use of computational linguistic techniques to learn from written data and make predictions about 5100
the structure and content of language, such as conversational AI like chatbots and natural language generation. (862% )

AI automation platforms
Software and services that enable enterprises across all verticals to leverage AI to automate critical business 11486
processes via predictive analytics. (273% )

Source : Deutsche Bank, World Intellectual Property Organization, OCED.AI.

Figure 23: Definition of autonomous machines

Number of Published Patents (Change VC Deal Value ($mns, 2012-
Autonomous machines Definition VC Deal Count
from 2012 to 2022)
Autonomous vehicle 3670
This includes the software and hardware to enable self-driving or driver assistance capabilities.
(1531% )
149,254 1,875
Robotics
Robotic systems and uncrewed aerial vehicles that can operate without human input. AI can be used for the 24762
learning, control, and adaptation of robots. (7367% )

Source : Deutsche Bank, World Intellectual Property Organization, OCED.AI.

Figure 24: Definition of semiconductor applications

Number of Published Patents (Change VC Deal Value ($mns, 2012-
Semiconductors Definition VC Deal Count
from 2012 to 2022)
Intelligent devices This covers: (i) Devices that measure specific parameters in real-world conditions (ii) Sensor systems (Assemblages
1901
of sensors and chipsets that empower specific IoT use cases such as smart buildings, industrial IoT, and connected
(1221% )
vehicles).
Processor design
Design of chips that attain high efficiency and speed for AI-specific calculations such as through parallel 574 52,531 3,257
calculations and low-precision calculations to reduce transistor count. (203% )

Edge AI software
Compression algorithms that optimise AI models for deployment within various semiconductor environments and 3843
edge devices. (693% )

Source : Deutsche Bank, World Intellectual Property Organization, OCED.AI.

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Appendix 1
Important Disclosures
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The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the
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in this report. Marion Laboure, Cassidy Ainsworth-Grace.

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25 May 2023
Thematic Research

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