- Israel is lagging behind the US and Europe in attracting AI investments and talent.
- Despite a high concentration of AI startups, growth in investments is slowing.
- AI investments in Israel declined in 2023, reversing earlier peaks.
- Concerns are rising over a shortage of skilled professionals with advanced degrees.
- Israel has a high concentration of AI talent but faces significant emigration of graduates.
- Investment in generative AI technologies in Israel is modest compared to global increases.
- Over 100 multinational companies have AI R&D operations in Israel.
- Government efforts to develop a long-term AI strategy are currently stalled.
Main AI News:
Israel is trailing the US and Europe in attracting investments for startups that develop artificial intelligence technologies and faces a potential shortage of skilled professionals in the field, according to a report by the RISE Israel institute and Google Israel.
Israel remains in the top 10 ecosystems for AI but has not fully capitalized on the technology’s potential as global competition intensifies. Despite a high concentration of AI-focused startups, Israel is experiencing slower growth in overall AI investments, as noted in the report by RISE Israel, formerly known as Start-up Nation Policy Institute (SNPI), along with Google.
While AI investments in the US and Europe have surged over the past two years despite the economic downturn, Israel saw a decline in 2023 to levels from 2018, following a peak in 2021, according to the report.
“The AI revolution is inevitable, and Israel cannot afford not to be a leading country in this field,” said RISE Israel chairman Prof. Eugene Kandel. “Besides keeping Israel competitive in the global race, adopting artificial intelligence can significantly improve the quality of life for Israeli citizens.”
Over the past year, industry leaders and tech entrepreneurs have expressed concerns that Israel could miss the global AI wave and needs a long-term strategy to allocate substantial resources to education, academic research, startups, and the infrastructure required for AI development.
Artificial intelligence, which enables computers to learn, has been around since the 1950s. However, the field has experienced a renaissance over the past decade, fueled by the vast amounts of online data and increased computational power. Advances over the last 10 years have allowed computers to analyze data and identify patterns to solve problems, often outperforming human capabilities.
The recent excitement around generative AI (GenAI), which creates complex content similar to human creativity, such as OpenAI’s ChatGPT and Google’s Bard, is generating significant global interest and expectation.
Although investments in Israeli startups developing GenAI technologies have grown by about 85% from 2020 to 2023, this increase is modest compared to the 900% surge in the US and 300% rise in European startups, according to the report on Israel’s AI industry.
Israel hosts 2,300 AI companies, accounting for a quarter of its tech firms, with over 60% focusing on software, the report highlighted.
Three Israeli startups were named among the 100 most promising AI startups of 2023 by New York-based data firm CB Insights: Exodigo, specializing in physical infrastructure; Visionary AI, in image processing; and AI21 Labs, in natural language processing and generative AI models.
Approximately 50% of local startups founded in 2023 use AI for healthcare, cybersecurity, autonomous driving, and other sectors. In life sciences, half of digital health companies use AI, compared to one in ten medical device companies. In agritech, the subsectors with the highest AI use are automation & robotics (46%) and smart farming (39%).
As of April 2024, over 100 multinational companies have AI R&D operations in Israel. Earlier this year, Google launched a $4 million fund to support startups developing AI technologies struggling to raise capital amidst the ongoing conflict with Hamas, which began with the October 7 attack in southern Israel.
In this challenging environment, the report raises concerns about a potential shortage of skilled professionals due to a declining number of graduates with advanced degrees, critical for the industry.
Over the past decade, Israel has struggled with a tech talent shortage relative to the rapidly growing demand for computer scientists, programmers, and hardware engineers.
In 2023, Israel ranked first globally for the highest concentrations of AI talent, followed by Singapore and South Korea, according to Stanford University’s AI Index report. Israel has the highest percentage of data scientists and machine learning experts earning over $100,000, an OECD survey found.
“This suggests either a high demand for AI professionals in Israel or a limited supply of talent in this field,” the report stated.
Prominent researchers such as Hebrew University Prof. Amnon Shashua, founder of Mobileye and co-founder of AI21 Labs, and Shimon Ullman, a computer science professor at the Weizmann Institute of Science, are internationally recognized for their AI and computer vision contributions.
“AI professions, which require more advanced degrees, face a greater scarcity of human resources than Israeli high-tech in general,” the report noted.
Two-thirds of employees in AI-related roles hold advanced degrees (MA or PhD), compared to 12.4% of software developers, the report found.
While the number of BA graduates in computer science, mathematics, and statistics grew by 60% between 2017 and 2022, reaching 4,400 graduates in 2022, the number of MA graduates was less than 700 in the same year. Meanwhile, the number of PhD graduates has stagnated at around 100 per year. Alarmingly, about 15% of MA graduates and 21% of PhD graduates in computer science move abroad, the report revealed.
“While Israel excels in R&D and has world-class talent in ICT (information and communication technologies), it lags in government strategy, infrastructure, and operating environment – crucial elements in maintaining its AI leadership and integrating AI technologies into the daily lives of Israel’s citizens,” the report warned.
With governments worldwide racing to develop national AI policies, Israel began working on a long-term AI strategy, but this effort is now on hold.
Conclusion:
The current trajectory suggests Israel may struggle to maintain its position as a leading AI hub. The slowdown in investments, coupled with a talent shortage and the emigration of skilled graduates, poses significant challenges. For the market, this means potential delays in AI innovation and integration, which could affect competitive advantage in the global AI race. Companies and policymakers must address these issues promptly to leverage Israel’s existing strengths in R&D and prevent a further decline in its AI industry. Failure to act could result in missed opportunities and diminished influence in the rapidly evolving AI sector.
