The generative AI arms race is just starting
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Illustration: Aïda Amer/Axios
Venture capitalists are pouring hundreds of millions of dollars into generative AI startups.
Driving the news: Reid Hoffman of Greylock Partners, an iconic Silicon Valley investor, just announced he's leaving Open AI's nonprofit board to avoid conflicts of interest with coming investments.
- "There are future trillion-dollar companies being built and invested in right now," Hoffman wrote on LinkedIn (which he co-founded), "which will not only change markets, but launch new ones."
Why it matters: Generative AI could become as foundational to life and work as today's cloud and mobile. So there's an accelerating arms race to shape — and profit from — that future.
What's happening: OpenAI's relationship with Microsoft helped ChatGPT leap out of the starting gates. That also has emboldened competitors, who wager that partnering with a legacy tech giant will prove cumbersome.
- So Silicon Valley venture investors have swiftly pivoted from "OpenAI is the next transformational tech company" to "We've found a way to beat it."
- Even many non-tech companies are tinkering with — and productizing on top of — the sorts of large language models that underpin ChatGPT.
Between the lines: The generative AI that has captured the public imagination today — notably OpenAI's ChatGPT and Microsoft's AI-powered Bing — requires tremendous computing resources.
- That means the core tech is likely to emanate from huge firms, running on the cloud computers of giants like Google and Microsoft.
- But plenty of startups will harness these technologies, and apply them to specific industries or consumer businesses.
Our thought bubble: Because of the huge resources and data troves that AI innovation requires, this cycle of tech competition could be more winner-take-all than previous rounds.
- Startup investors are betting they can overcome those forces.
- But newcomers will be building on Microsoft and Google models and clouds, then hoping they might be acquired by the giants — unless antitrust regulators try to block the deals.
Reality check: Venture capitalists are fickle, as evidenced by brief funding booms in nanotech and the metaverse.
- Ina Fried and Scott Rosenberg contributed reporting.
