In a recent podcast episode, Aidan Gomez, CEO of Cohere, stated that the competition in the AI industry is extremely fierce, and the business of selling AI models is rapidly becoming a "zero-profit industry." He mentioned that companies like OpenAI and Anthropic invest billions of dollars annually to train large models such as GPT-4 and Claude, but due to intense price competition, the overall business has become exceptionally fragile.
Image source: Image generated by AI, provided by Midjourney
Gomez pointed out that the current price war for AI models has almost eliminated the industry's marginal profit. "If you rely solely on selling models, the days ahead will be very tough," he said. By "selling models," he refers to providing developers with API access to these AI models, a predicament faced by companies like OpenAI, Anthropic, Google, and Cohere.
AI model development companies are facing a challenge: while continuously improving model performance, they also have to pay significant fees to hardware manufacturers like NVIDIA. Meanwhile, companies are lowering model access prices to retain users, with open-source models from companies like Meta being offered for free.
Gomez also mentioned that despite the current significant losses faced by AI models, he believes Cohere's AI models will be an attractive business in the long term. To generate revenue in the short term, launching related products is a viable path. He emphasized that the current AI model business is operating at a loss.
For giants like Microsoft and Google, they can absorb these losses through financial subsidies, but for startups, the situation is different. Cohere is one of the few startups still developing cutting-edge AI models, alongside OpenAI, Anthropic, and Mistral. Many similar startups, such as Inflection and Character.ai, have been acquired by large cloud service providers, leaving their businesses technically intact but non-profitable.
Gomez also noted that relying on cloud service providers is not a good business model. He pointed out that venture capitalists are only concerned with returns, while cloud service providers may have other motives. "This is very dangerous for startups," he said.
Although the industry is full of anticipation for AI model innovation, when profitability will be achieved remains uncertain. And clearly, not every AI startup will be able to wait for that moment.
Key Points:
🌟 Intense competition has almost zeroed out the profit from selling AI models, forcing companies to face the pressure of price wars.
💰 Startups struggle to survive under the subsidies and low-price strategies of giant companies, facing immense survival pressure.
🚀 Despite the current severe business model losses, the market still holds significant demand potential for AI models in the long term.