I'm flummoxed by this question. From what I see, AI is at the core of much of what's happening in Silicon Valley and in tech in general.
But then, I'm also using semantic web tools in building a search engine for financial news at http://Newsley.com. Right now we're indexing and automatically categorizing 500 financial news articles a day. And, I'm really looking forward to adding on recommender systems and use some machine learning with the scads of data we're collecting.
AI research and related topics and startups rarely make news. Is it really such a dead field? There's never any breakthroughs announced, and there's no grandiose research projects underway that I know of.
AI companies are all over the place. Any decent online ad platform is essentially a huge recommender system. Search and search quality are essentially problems that traditionally fit into a "AI" category. Have you shopped on Amazon recently? Where would they be without their recommendation system. Same with Netflix.
I just bought a $40 HD webcam that comes with software that can track points on my face in real time. It then drives a 3D puppet in sync with my facial expressions and movements. When I was studying animation 8 years ago, it took $500K worth of equipement to do motion capture. Gazehawk launched a few months ago, and are already profitable selling eye tracking tools: http://www.gazehawk.com/.
You can now buy a friggin robot to vacuum your living room for $150. The US airforce now considers commanding a wing of drones essential experience for Colonels interested in promotion. Most drone pilots in the Iraq and Afghanistan wars a pilot their aircraft from offices in Nevada. Robots are essential members of bomb and IED disposal teams. One of DailyBooth's founders was stuck in the UK because of visa problems, so last year he was attended invetsor meetings virtually by using an Anybot.
You can play virtual golf by swinging a controller in your living room if you own a Wii. The last RPG that I played was Oblivion and I was blown away by the character AI. That was years ago. I'm afraid to buy any new games because they'll suck up so much of my time.
Far from whithering away, just the opposite has happened. What used to be considered AI has now become so commonplace that we don't think twice about using it. If you don't believe me, just Google around for a while. You'll find the answer.