A Northzone partner believes that most AI tools will not survive as standalone businesses

Sanjot Malhi, a partner and head of the Northzone growth fund, stated in an op-ed for Fortune that the market no longer needs new artificial intelligence tools to boost productivity. According to him, the fund has evaluated over a hundred such products over the past 12 months and believes that most of them will not survive as standalone businesses.

Malhi noted that the number of AI products for work has surged in 2023–2024. Among the examples he cited were Lovable for programming, Harvey for lawyers, Abridge for medical administration, and Granola for note-taking. Such services can search for information, synthesize it, automate tasks, save time, and maintain work context; however, there are already hundreds of general-purpose and industry-specific solutions on the market, the investor emphasized.

According to Malhi, standard AI productivity tools are in the weakest position because they do not generate sufficiently sustainable competitive advantages. He compared them to more advanced programming tools: in his assessment, this category has evolved from GitHub Copilot to systems such as Cursor, Claude Code, Codex, and Cognition, which are capable of independently performing hours’ worth of human work.

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According to Northzone’s estimates, following the launch of ChatGPT in November 2022, the AI ecosystem saw an increase of approximately $1 trillion in new revenue. At the same time, Malchi considers the sustainability of this revenue to be risky: AI models face competition from open-source solutions, chip manufacturers face competition from new players, and application products face competition from the foundational models themselves.

Northzone analysts estimate the annual recurring revenue of AI applications at $150–200 billion. According to this estimate, the largest and most mature segment is AI for programming, which accounts for 20–30% of this revenue. Malchi suggested that other industries could undergo a similar evolution—from auxiliary tools to autonomous systems capable of independently performing complex tasks.

The columnist believes that investors should focus on products that create new value, particularly AI for scientific research, defense, and physical systems. He also identified systems capable of operating for extended periods without constant human supervision as the next frontier for investment.