AI's high growth no match for iPhone
Generative AI will experience explosive growth in coming years, but the cash the core technology generates for its inventors will pale in comparison to revenue from Big Tech's existing services and hardware, per a new S&P Global report.
Why it matters: Generative AI is blowing our minds and changing our jobs, but the companies driving that innovation will struggle to join the household name ranks of Apple, Google and Microsoft.
Be smart: AI providers will often be operating in less lucrative B2B markets, while consumer-facing companies rack up savings from using AI, and find ways to sell more profitable AI-powered services.
- Five years after smart phones hit the market, their global market revenue was around $330 billion — nearly 10 times what's forecast for generative AI.
- Apple's iPhone alone brought in $78.7 billion in revenue in 2012, five years after launch: more than double the total predicted market for all generative AI five years from now.
- Google's advertising revenue topped $224 billion in 2022. Even if the company's Bard chatbot ended up dominating the market, it would be only a minor contributor to Google's income.
Yes, but: Generative AI's greatest impact is likely to be in its transformation of productivity and creativity in many businesses.
- While it's extremely rare for a start-up to hit $1 billion in revenue in its first five years, any generative AI startup that could capture 15% of the predicted market would achieve that feat.
What they're saying: S&P Global predicts that foundation models will remain the largest source of income for generative AI providers, ahead of text generators.
- "No VC returns there," Keith Rabois, general partner at Founders Fund.