Israel retains its position as a global AI leader in 2023
Israel retains its position as a global AI leader in 2023
Despite being roughly 450 times smaller than the current global AI leader, the United States, Israel finds itself at number 7 in the Global AI Index 2023 by Tortoise. The Middle-Eastern nation is also ranked 7th by AI Talent, 7th by AI Development, and 3rd by Commercial Implementation.
According to the AI Index Report 2023 from Stanford, Israel is also 4th in the world after the US, China, and the UK by total AI investment in the private sector. The same report ranks Israel 2nd in the world of AI relative to its size, further noting that 6% of all global authors involved in NLP-related publications are Israeli — a high figure for a nation with a population smaller than Seoul.
However, the country is far behind other nations when it comes to different AI metrics, namely Government Strategy (47th), Infrastructure (28th), and Operating Environment (23rd).
Let’s look more closely to see why that’s the case.
AI investment and R&D
AI investment has been Israel’s strongest point. According to Stanford’s research, AI investment in the country currently stands at close to $11 billion. OECD’s research goes even further to suggest that investment into AI-related ventures in Israel has been growing exponentially for the past decade, reaching a cumulative total of $18 billion this year.
This isn’t surprising given how much Israeli AI companies have been raising. For example, AI21 Labs, which specializes in generative AI models, has recently become a unicorn, having attracted $155 million in investment and reached $1.4 billion in valuation. Another Israeli AI company, Pinecone, which specializes in vector databases for ML, received $100 million in April, reaching a $750 million valuation.
According to this year’s AI report from Tel Aviv University (TAU) citing the Israel Innovation Authority (IIA), over half of all R&D business efforts in Israel today are rooted in AI. Notably, 2021 was a record investment year for the nation, with a total of 7000 tech startups and 60% of all funding going toward commercial AI research.
According to the Israel Tech Landscape Review 2023 citing data from the Finder platform, today Israel has 1400 startups that actively utilize ML technology, of which almost 50 specialize in generative AI. Interestingly, most of them were established after 2019, having contributed 45% to the country’s total VC investment volume over the past three years. Largely the same figures are provided in this year’s Government AI Readiness Report.
Government initiatives and military AI
Be that as it may, things have now begun to go downhill for Israel, and not without help from the government. During this year’s first quarter, Israeli startups raised $2 billion, and even less than that in the second. These stats represent the lowest figures since 2018, with each of the past six quarters showing a decline from the one before. In addition to being one of the results of the global economic slowdown, other likely factors include ongoing political tensions in Gaza, as well as Netanyahu’s controversial judicial reforms.
It seems the private AI sector in Israel is currently suffering from uncertainty brought in by the public sector, which is quite telling, given the Israeli government’s poor AI history. The state’s first major shot at AI came in 2018 but largely stalled at the stage of written protocols, despite government plans to establish an AI directorate and launch a 5-year national AI program with a budget of $1.5 billion. This unfortunate pattern persisted into 2020 with additional government proposals that, once again, failed to materialize due to the misallocation of government funds.
This year, the Israeli government decided to present a new AI initiative led by the Innovation, Science, and Technology Ministry. This is a step long overdue, especially in view of the fact that field research suggests most Israelis, close to 85%, believe AI regulation to be an urgent necessity. While the Israeli government may yet succeed on this path, as of right now, the country lacks a clear plan and comprehensive AI regulation, conclude experts from this year’s Global AI Legislation Tracker.
That said, Israel has seen some AI-related government successes, though, unsurprisingly, they’ve all been related to national security. Among them are specialized tactical AI recommendation systems for “faster and better target identification” and unmanned spy submarines, aka AUVs (Autonomous Underwater Vehicles) that operate similar to ML-backed driverless cars.
AI talent and startups
Undoubtedly, Israel’s AI successes across all sectors have been due to the nation’s AI talent. Researchers from Oxford Insights stipulate that Israel is among global AI leaders precisely because of its extremely “high human capital in research skills and capabilities.” According to some estimates, Israel has among the highest AI skill penetration rates in the world and the third highest after India and the US for women.
Some publications suggest that the tech industry makes up 10% of the country’s total labor force. Importantly, most of these specialists are rather young — OECD’s data indicates that almost 42% of all Israeli AI professionals are individuals under the age of 35.
The application of Israel’s AI expertise is in some ways similar to India’s. This is the case not only because both Israel and India have a history in IT services backed by their highly qualified citizens, but because Israel’s entrepreneurs, like India’s, seem to thrive beyond their home country. According to the latest findings from the National Foundation for American Policy (NFAP), Israeli immigrants have founded 54 billion-dollar companies in the US that are now shaping the AI startup landscape in North America.
Naturally, this pool of budding AI talent is most visible at home. According to Venture Capitalist citing Netbase Quid, Israel has over 400 full-scale AI companies today (as opposed to firms using ML to optimize business processes), which is indicative of an exceptionally robust AI ecosystem. Furthermore, political turmoil or not, some sources, including Remagine Ventures, claim that the number of generative AI startups in Israel has more than doubled in just five months, rising from roughly 70 to almost 150 companies.
Among noteworthy tech startups from Israel that have AI at the core of their business models are the following (check the embedded links for further reading):
AION Labs (AI-backed drug discovery)
Alison (AI-backed analysis of creative materials with typeface characters)
Ask-AI (generative AI for business / text)
Bria (generative AI / visual)
Evogene / Lavie Bio (AI-backed computational biology and product discovery)
Gong (AI-backed customer data analysis)
OneView (AI-backed analysis of satellite and aerial imagery)
PathKeeper Surgical (AI-backed spinal surgeries)
Protai (AI-backed drug discovery and disease prevention, including oncology)
SPIRITT (AI-backed software development from verbal description)
theGist (AI-backed workspace efficiency platform)
To sum up
Israel has consistently ranked highly in AI because of its skilled AI talent, as observed both in Israel and abroad, large-scale AI investment in the private sector, and widespread AI implementation by Israeli businesses.
Despite a slowdown caused by political unrest, Israel’s AI companies continue to attract investment, though understandably at lower volumes currently. Nevertheless, many Israeli companies that utilize ML are paving the way for groundbreaking solutions, which is particularly commendable in the medical field, where many of the country’s startups are involved in AI-assisted computational biology, drug discovery, and surgical procedures.
The Israeli government is not faring as well in this respect, with its AI successes largely limited to military applications. While new AI plans from the state have been announced, whether these come to fruition is yet to be seen. So far, the Israeli government’s AI track record has been rather unimpressive with multiple failed initiatives between 2018 and 2022, resulting in the country’s low scores in government AI strategies and infrastructure.
We shall keep an eye on how things develop in Israel next year!