Some of the most promising startups in the generative AI space in Silicon Valley are disappearing as they are being acquired by or closely tied to US tech giants.
Due to lack of funds, companies like Inflection AI or Adept have recently experienced founders and key executives quietly leaving to join major tech companies through undisclosed transactions.
Critics suggest that these transactions are essentially acquisitions, strategically designed by Microsoft or Amazon to avoid scrutiny from competition regulators, which the companies vehemently deny.
Meanwhile, startups like Character AI are struggling to secure the necessary funding to remain independent, and companies like French startup Mistral are seen as potential acquisition targets for tech giants.
Even OpenAI, the creator of ChatGPT, is in a partnership with Microsoft, the largest company by market capitalization, with Microsoft investing $13 billion to secure exclusive access to OpenAI’s cutting-edge models.
Amazon also has its own arrangement with Anthropic, which develops high-performing models.
– ‘Big money’ –
Getting involved in the generative AI revolution spearheaded by ChatGPT requires substantial financial backing only available to tech behemoths like Microsoft, Amazon, or Google.
Sriram Sundararajan, a tech investor and adjunct faculty member at the Leavey School of Business at Santa Clara University, noted that “the ones with the big money set the rules and manipulate outcomes in their favor.”
Unlike the traditional Silicon Valley narrative, generative AI innovation cannot be born out of a founder’s garage. This type of AI technology necessitates massive computing power from specialized servers.
Brendan Burke, an AI analyst at Pitchbook, highlighted that startups in this space are founded by former research leaders at major tech companies and require resources that only large cloud providers can offer.
Many of these founders, including those of Inflection or Adept, have backgrounds at Google or OpenAI.
Mustafa Suleyman, the former head of Inflection, who previously worked at Google DeepMind, has now joined Microsoft to lead the consumer AI division, taking key employees with him. Although Inflection still exists on paper, it has been stripped of the assets that made it valuable.
According to Abdullah Snobar, the executive director at DMZ, aligning with big tech companies makes sense as their deep pockets help keep the innovation moving forward.
– ‘Sucking up all the juice’ –
However, aligning with established tech giants also poses the risk of stifling competition and consolidating creativity and innovation within a few major players in the industry.
Regulators are increasingly scrutinizing big tech companies for their aggressive acquisition strategies. The growing concerns have prompted US, European, and UK regulators to address the issue and ensure that competition in the nascent AI industry is not overshadowed by tech giants.
The industry is at a crossroads where regulation is catching up to the rapid advancements in AI, signifying a shift in the landscape.
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