Mar 20, 2024 - Technology

In AI, the big just keep getting bigger

Illustration of a hand moving a dollar-sign chess piece

Illustration: Sarah Grillo/Axios

Big AI is just going to keep getting bigger: that's the takeaway from this week's onslaught of AI news — and it's barely Wednesday.

Why it matters: Generative AI's disruptive force once looked like it might open a door to new players on the Big Tech chessboard. But AI's high cost and the incumbents' strong hands have dimmed that prospect, and instead we're seeing the industry's giants concentrate more power.

Driving the news: In a surprise announcement Tuesday, Microsoft said it was hiring Mustafa Suleyman — an AI pioneer who co-founded DeepMind — to run its consumer-oriented Copilot business.

  • Microsoft also brought on many of Suleyman's colleagues from, where he was co-founder and CEO.

Inflection was a hot AI startup — one of the highest-profile small competitors to Microsoft's partner OpenAI.

  • It had raised $1.3 billion, with Microsoft as the largest shareholder.
  • Now the future of Inflection's Pi chatbot, known for its friendliness, is unclear.
  • Inflection has hired a new CEO and says it's steaming full-speed ahead with a plan to sell custom bots to businesses.

All this makes the road for other AI startups — even those that have significant war chests, like Perplexity and Mistral — looks that much rougher.

  • The smart money is telling every newcomer to find a Big Tech partner just to join this game.
  • But the giants hold all the cards — the money, the talent and the customers — which means most of the change-the-world startups will become footnotes.

Zoom out: Monday, Bloomberg broke the story that Apple was in talks to use Google's Gemini model to power generative AI features on the next iPhone.

  • This, Apple-watchers noted, suggested the company's efforts to catch up with rivals in the hot generative AI market haven't yet paid off.

But the deal news also suggests that Apple — which has apparently also been talking with OpenAI — wants to place its bets on the other colossi of the industry, rather than on fledgling startups.

The other side: Money keeps pouring into this market, and plenty of that money will end up funding startups.

  • The Saudi government plans to launch a $40 billion venture fund to invest in AI, the New York Times reported Tuesday.
  • That enormous sum dwarfs even the largest U.S. funds, and would be second globally only to Japan's SoftBank.

Follow the money: The main reason giant companies are calling the shots in AI is that it's fantastically expensive to build and run the kind of AI that's taken off in the wake of ChatGPT's success.

  • The money is flowing to companies like Nvidia that make the hardware that makes AI possible, and cloud providers like Microsoft, Google and Amazon, whose data centers can run the monster jobs that train gigantic generative-AI models.
  • Startups daunted by directly taking on the giants are more likely to thrive by finding market niches where they can adapt the big companies' giant AI models to the needs of specific industries, professions and use cases.

What to watch: Smaller AI is a different bet that no one should count out — and if the bigger-is-best strategy falters, the landscape could shift again, fast.

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