The tech giants are eating the chatbot kings
Open-source AI firms are meanwhile offering a better alternative to Silicon Valley
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WHEN ChatGPT hit the market in November 2022, it sparked a battle for a new product category known as foundation models. These artificial intelligence (AI) systems, which generate text and images, cost tens of millions of dollars in computing power to build, and only a few companies have the resources and talent to create them.
In March, one of them was swallowed up by Microsoft – and much more quickly than anyone expected. After raising more than US$1.5 billion from investors, 70 staff from Inflection transferred to Microsoft, which is paying the company US$650 million in licensing fees in a deal designed to make investors whole.
Gavin Baker, a managing partner at investment firm Atreides Management, tweeted that certain types of foundation models were now “the fastest depreciating assets in history”. He is right. These capital-intensive businesses have technology so novel it can take years to figure out a viable business model. And they are so expensive to build that future rounds of funding are likely to come from deep-pocketed investors in the Middle East.
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