Israel is a high-tech powerhouse: How can it win the AI race?

In a special panel at the Globes Israel Business Conference, Meta general manager Israel Adi Soffer-Teeni talked to Israeli high-tech executives Hamutal Meridor, president and co-founder of a start-up, still in stealth mode, Gigi Levy-Weiss, general partner at venture capital fund NFX, Mickey Haslavsky, founder and CEO of Enso, and Amit Krig, senior vice president and director of the Nvidia development center in Israel. The panel was titled: "AI and the new opportunities for the Israeli ecosystem."

Soffer-Teeni: "We're sitting here today and we're going to talk about AI, but the most important thing we should all understand is that, if we sit on this panel in a few months, some of the things we talk about today won't be relevant, because the pace is insane. The pace of the last two years is something I've never seen in my life.

"As evidence of that you can look at the rate of technology adoption over human history: it took 62 years for 50 million people to own a private car; it took 68 years for radio, 14 for television, four for the Internet, a little less than three years for the iPhone. ChatGPT took two months to reach 100 million users. It's crazy. I think everyone understands that this is the technological revolution that will have the greatest impact on all of our lives. Today, there's a race between countries, and in the end, some countries will be AI superpowers. Israel has to be one of them.

"Artificial intelligence is at the heart of everything we do. It's artificial intelligence that improves people's experience on Meta's platforms, and it's what ensures delivery of consistent results to the millions of advertisers on those platforms.

Investing in artificial intelligence

"Israel is a high-tech powerhouse that is capable of running fast, and in the past few decades, whenever there was an opportunity, we built an entire ecosystem around it: cyber, for example. In the case of AI, we will have to make sure to have the best here — investors, engineers, academia — so that the international companies will establish AI centers. At the same time, we have had two very difficult years: the judicial reform, and then October 7, which affected local high- tech. What we have to do is understand how to speed up, in order to win the race."

Soffer-Teeni asked Gigi Levy: "You've invested in dozens of AI-based companies. What do we mean when we talk about AI, and why is it so important?"

Levy: "Everyone is familiar with this magical thing called AI, but this is only the initial stage. For it to happen, there have to be layers that produce it. For the most basic layer, you need computers, processors, because this magic takes more computing power than normal applications. That's where the chip companies come in, mainly Nvidia which unquestionably dominates the production of the processors and the way they talk to each other.

"In the second stage, you need data centers, computing centers. That seems easy, but the computing power is different, and you need much more electricity. You need the fuel of this world: data. It takes huge amount of information to train the model. Without this information, the rest is worthless. In the medical industry, Israel is in a pretty good place, because the health funds have well organized medical information, and they work with companies. On top of all these there are the basic models, which are like the programming languages of the past. These models come, in part, from companies that charge for them, while some are open source.

"How are these used? For the application layer. Here, we are talking about applications that behave differently. There are two levels: those that do one thing, and those that execute a series of tasks towards automatic task completion. These can be given to AI to do. Alongside all these, there's another thing, and that's all the tools you need to run the program. There are dev-ops tools, tools for developers, and there are cyber tools. In the end, it's very similar to how we used to use regular software before, but it produces something much more powerful, a much bigger revolution. These things have completely different capabilities, even before we enter the world of full autonomy.

"Why is this critical for our country? The world is moving towards a revolution in platforms. Every revolution like this creates crazy opportunities. Secondly, this revolution encompasses the future of the entire technology world. There is no bio development that does not include AI. If you want to develop a new CRM system, for example, you can't think about it without thinking about how it will work with AI. You can't do without it. Anyone who does something that is not AI, will probably fail.

"On top of that, it completely affects all the jobs in the high-tech world. Writing software itself is changing. Anyone who writes code for websites today is in a profession that will no longer exist. It changes the world of employment and investments. It also affects the services to the country's citizens. And lastly, if anyone thinks that this doesn't have a unique effect on the military sector... I must say that a large part of what we will have to face in the future is AI. It's not just something that's nice to have, but something that is fundamental to our existence."

Soffer-Teeni addressed a question to Hamutal Meridor: "We understand the magnitude of this event. Where does Israel have an advantage?"

Meridor: "Consider life before the smartphone. Today, everything is in there: wallet, calendar, the way to listen to music, read books, communicate. All areas of our lives are going to change: health, travel, media, etc., both private life and employment. I think this is an amazing opportunity. There are a few leading companies in the world, but this is not where Israel should compete. Israel should be in applications that use all this wonderful AI. Israelis are very good at identifying a problem and coming up with the fastest solution. To date, not one big startup has done this. In the coming years, we will see many, and I am optimistic there will be Israeli ones as well.

"There's something we don't remember, because we live within our ownreality, but if you think about a kid in Silicon Valley, after getting a degree in computer science, he has opportunities and money, and life is easy. Israelis are hardier, whether our entrepreneurs or society in general, certainly over the last year. That's something every startup is made of. It's not an easy road, there are bumps and hardships, but an Israeli entrepreneur will be more successful and less afraid.

"Regarding data — which is the real fuel of this revolution — Israelis are data champs, especially in the world of health, but also in general. I will also say that many people don't think that way about Israel, but few have paid attention to the fact that we've been at war for over a year now, and anyone who has seen up close how the IDF and the security establishment have conducted themselves, knows they are very ethical. Ethics must be part of AI. Many countries don't understand that to have this tool is to have great deal of power in hand. And in the area of ethics — and maybe this is an unexpected plot twist — we Israelis have a lot to give to the world on this subject."

Soffer-Teeni turned to Amit Krig: "Nvidia bought Mellanox in a historic $6.9 billion acquisition. Tell us a little about the deal, and where Nvidia is and Mellanox are influencing this revolution."

Krig: "First of all, regarding the pace: the technology is accelerating, and we're seeing an exponential graph. We're OK, but we need to adapt to this pace and even accelerate, if we want to open a gap.

"As for the deal, it wasn't at all easy to merge, because it was during the Covid pandemic period, when it was difficult to meet face to face. The culture of the two companies was essentially the same, and led to a very successful merger, one that Wall Street considers to be the best merger ever."

Soffer-Teeni: "What needs to happen in Israel's infrastructure to facilitate an AI industry and a full AI ecosystem?"

Krig: "The foundation exists and we should be encouraged by that. It's our human capital and amazing culture that contribute to our success in high-tech. We need more and more human capital heading towards the industry. That isn't enough. This industry starts from a technological base, which today is lacking in Israel. Regarding energy infrastructures: to set up a data center today requires tens and hundreds of megawatts. We need to invest very quickly in our energy infrastructure — that's a technology in itself. Green energy is better, of course. All of this is infrastructure that we, as data center builders, see as lacking."

Levy: Understand that the electricity demands of one AI data center are like that of a whole new city. Israel Electric Corporation isn't able to provide that today."

Krig: "Today's solutions use GPUs outside of Israel. It's very important to be close to the technology. Available access to computing power for the security forces, for startups."

Levy: "When the State of Israel runs all its civil services on AI — that's where we want to go. We can't afford to use an external infrastructure, because what happens if there's a war and it falls?"

Soffer-Teeni: "In other words, first of all, the energy infrastructure issue needs to be resolved."

Krig: "Exactly."

Haslavsky: "Gigi talked about AI agent technology, applications that use AI to complete tasks. We develop bots that provide services which cost a lot of money to small businesses, and lower their price by 90%. For example, SEO services with the help of AI agent technology. This is how we help small businesses to compete. Most small businesses cannot afford a digital agency to manage their marketing. We provide services at unbelievably affordable prices. In the next two years, we'll release thousands more services for everything to do with business management."

Start-ups

Soffer-Teeni: "You founded two startups that didn't have AI at their core, and now they do. How is it different?"

Haslavsky: "It's important to understand the magnitude of this opportunity. It's a trillion-dollar market. First of all, it's different in terms of impact; we have the ability to build one of the world's largest companies in this sector. Second, it's different in terms of speed. We founded the company in April and by November, we already had a product online and customers all over the US. The acceleration is simply insane. We are in the race, and we hope that Enso, flying the Israeli flag, will lead the AI agents field on the international stage."

Soffer-Teeni: "We recently launched an accelerator for AI startups. 10 years ago, there was almost no such industry in Israel that addressed the B2C Tech consumer."

Haslavsky : "In recent years, there have been companies like Fiverr, Monday , and Wix, which are like an 8200 for B2C, and they produce all the talent in that area. If we are going to set a goal of becoming the AI Nation, and invest resources in it, we need to stop thinking about what is easiest for us — cyber and software — and go all in on AI for the consumer, because it's going to touch all areas. If, two years ago, you had told me I'd be using an Internet search product that wasn't Google, I would have said that's nonsense. Today I search elsewhere."

Soffer-Teeni asked Levy: "How does it look from the investment side?"

Levy: "Every company that comes to us is an AI company. I am optimistic, although I will say something not so optimistic: both large and small companies create value in AI. The first layer I mentioned includes veteran, large companies. Even those that produce AI models are already relatively old companies This leaves us with what Israel has always been good at: providing applications for businesses, for small businesses, for consumers, as well as developing tools.

"This revolution chose to happen during two bad years: ten months of internal strife, and external and internal strife since then. Instead of all the energy being directed to making us leaders by a distance, right now I see a problem. It's not that there aren't amazing companies, but fewer new companies have emerged; 400 in 2023 compared with 1,400 in previous years. The gap must be closed, and that is a task for all of us.

"Beyond investment in AI per se, startups have changed entirely. Today you can automate things, instead of using dozens of people. Mickey built a company in just a few months. With 3-5 people, you can build a company that will do what hundreds of people did before. Startups need to run faster. We are starting to see indications of a return to focus, and we need to keep pushing, from government to entrepreneurs. This is the key to Israel's economic future."

Soffer-Teeni: "What is the most important thing to do to become an AI powerhouse?"

Meridor: "The future of the world is very unstable. More wars are expected. The whole world understands the need to arm, and that wars will be different. In the light of this situation, if we can leverage and build something that will serve both us and the West against the axis of evil of Russia, Iran and China — this what needs to be done."

Levy: "In the end, if we can summarize, all of the components are there. What's mainly needed is for the government not to interfere, to lower regulatory barriers, and encourage investment."

Soffer-Teeni: "Europe should always be seen as a warning sign, where regulatory burdens prevent it from leading. We need to create a convenient environment for entrepreneurs, investors, and companies."

Krig: "AI computing centers — for us to build them, we need power infrastructure."

Haslavsky: "We need to build an ecosystem. It comes from the bottom up, and we will do everything to share experience and resources with other startups."

Soffer-Teeni: "I'm putting you in a time machine. What do you see happening in 5 years?"

Meridor: "The wonderful thing that can happen is that if AI automates all menial work, there will be more time to be human, more time for empathy."

Levy: "All of our lives and our daily tasks will change completely, from finding information to paying bills. We must remember: the gap will be very wide for those who don't know how to use these tools and who will be left behind. Our national mission is to ensure there won't be a gap like that in Israel."

Krig: "As for how we'll feel... most of us know what it was like when we didn't have a phone. How did we arrange to meet? How did it happen? What did we do? So, that will be the feeling five years from now, 'How did we do without?'"

Haslavsky: "To be able to deal with what we like, and not with chores that take up our time."

Soffer-Teeni: "We won't have mobile phones in our hands. We'll have glasses, not just Internet-enabled, but with AI as part of us."