Suppliers of generative artificial intelligence frontier models (advanced artificial intelligence systems that push the boundaries of what generative AI can achieve) are under scrutiny for capital investments and pathways to revenue, given the explosion in investment that started in 2023.
Risk is very high, but so is the potential reward. And even if most contenders eventually will lose their bets, the winner is epected to dominate the market.
Some idea of the ramp up of investment can be seen in venture capital investments alone, and excluding investments by leading firms such as Google, Microsoft, Meta, Apple and Amazon, to support generative and other forms of AI.
Those figures do not include any sums spent by enterprises, software or hardware firms to create AI features, apps or platforms. Nor doe those amounts include investment by hyperscale app providers or device firms to add AI features to their existing products.
Estimating all AI capex by the hyperscale app and device providers is difficult, as many types of capex as well as operating expense (personnel, for example) are involved. Often, all we know is aggregate capex.
* total capex, not just AI capex
And most of the revenue tied to AI investments is indirect, often contributing to cloud computing as a service revenues, for example.
We should expect to see continuing reporting of AI-attributed revenues by firms making big AI investments, even as we have to expect an awful lot of somewhat indirect approaches to identifying that revenue growth.
Just as important, if generative AI winds up being a “winner take all” business, as most other computing segments have been, there will be no prize for third best.
We have already seen that pattern in many other computing markets. The leader in search has 91 percent market share. The browser leader has 65 percent share. The mobile operating system leader has 72 percent share. The U.S. ride-hailing leader has 68 percent share.
So if generative AI follows that pattern, the strategic choices are “don’t play” or “play to be number one.” That implies most of the investment, in most of the firms, will be stranded or lost, eventually. But a whole ecosystem might be built around the leader.
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