After Microsoft CEO Satya Nadella hired Inflection AI co-founder Mustafa Suleyman, there were signs that artificial intelligence startups are struggling. Ben Kriemann/Getty Images
Generative AI has just begun a new phase. This one looks a little less nice than the previous one.
Many AI startups are showing the first signs of weakness after a period of immense growth.
Inflection AI lost a co-founder to Microsoft and other startups are struggling to generate revenue.
This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by a real editor.
When the story of this decade’s generative AI is finally written, the past month will likely mark the moment when the industry began to think twice about the hype.
Since the launch of Chat GPT, the hype around artificial intelligence has been omnipresent. The first AI companies have conquered the Nasdaq. Billions of dollars have flowed into startups. And luminaries like Bill Gates have called the technology “as revolutionary as cell phones and the Internet.”
This euphoria may no longer be so easy to justify following a number of recent developments. Startups that once raised billions of dollars have scaled back their ambitions. Hungry founders who spoke big have capitulated to the power of Big Tech. And the opportunity for anyone to make money from the word “AI” seems less promising.
In other words, a new era has begun in which success is far less certain than it initially seemed.
AI companies face hurdles
One of the most telling developments in this new phase came last week from a barely two-year-old OpenAI competitor called Inflection AI.
The startup announced that its co-founder Mustafa Suleyman, who also co-founded Google’s DeepMind, is leaving the company to lead a new AI division at Microsoft. The company, which Suleyman co-founded with tech veteran Reid Hoffman, has also deprioritized Pi – its ChatGPT competitor – for consumers.
Read too
This man is leading the investment bank Goldman into the age of AI
Mustafa Suleyman will join Microsoft from Inflection AI. Inflection
It is not controversial to say that this caused a bit of a shock in the AI community. After all, Inflection was worth four billion US dollars (around 3.7 billion euros), after the company only received 1.3 billion US dollars (around 1.2 billion euros) in June 2023 from, among others, Bill Gates, Nvidia and from former Google CEO Eric Schmidt.
At the time of the raise, the company publicly said it was very confident about its AI, which would make its chatbot Pi a “friendly and supportive companion” for its users. Suleyman even thought it appropriate to consider personal AI as “the most revolutionary tool of our lifetime” to call.
But now the head of the company and a number of top engineers and researchers have left the field. So much for that.
However, it quickly became apparent that Inflection AI wasn’t the only company struggling.
Stability AI, the unicorn behind AI image generator Stable Diffusion, announced Friday that its CEO, Emad Mostaque, is stepping down. The reason for this step? Apparently so he can “pursue decentralized AI.”
„The Information“ Meanwhile, reported that another OpenAI competitor – this time Cohere, which was founded in 2019 by former Google employees – only generated $13 million (around twelve million euros) in annual revenue at the end of last year.
Business Insider (BI) understands that this figure rose to $22 million (around €20 million) in March following the launch of Cohere’s new Command-R model. According to reports, the company is in the late stages of Fundraising discussionsto raise more money at a valuation of five billion dollars (around 4.6 billion euros).
What went wrong?
Emad Mostaque has resigned as CEO of Stability AI. Stability AI
These companies were among the most hotly discussed AI companies last year. So what happened?
As my colleague Ali Barr notes, AI has a bit of a problem with consumers. In Inflection’s case, the company focused on enterprise customers, while Pi just a million users per day could record. That’s not very much considering the size of the consumer market.
Inflection offered Pi as a free chatbot but had considered a paid subscription, reported „Axios“. It’s hard to say how much traction this would have in a market where all competitors offer a free chatbot to attract the mass market.
Cohere has tried to cleverly avoid the consumer market by avoiding it altogether. The company has focused on enterprises from the beginning. But the fact that it took some time for sales to grow is a sign that buyer interest in enterprise-grade AI can vary widely.
Stability’s Mostaque, meanwhile, appears to have acknowledged that big tech companies have unassailable power in AI. In one Post on X He said that centralized AI cannot be defeated with “even more centralized AI.”
External content not available
Do you have a contentpass subscription but still don’t want to miss out on displaying external content from third-party providers? Then click on “agree” and we will integrate external content and services from selected third-party providers into our offer to improve your user experience. You can view a current list of these third parties at any time in your privacy (link to privacy). In this context, usage profiles (including based on cookie IDs) can also be created and enriched, even outside the EEA. In this case, your consent also includes the transfer of certain personal data to third countries, including the USA in accordance with Article 49 Paragraph 1 Letter a) GDPR. Further details on data processing can be found in our data protection information and privacy policy, which are available at any time in the footer of our offer. You can exercise your consent to the integration of external content at any time in the footer of our offer via the “Revocation Tracking” link.
Agree and view external content
But few standalone companies seem to be able to move forward in this space without the support of a blue-chip company.
Stability, which was funded by a group of private investment specialists including Coatue and Lightspeed Venture Partners, has struggled to get the backing of a major tech company that its competitors have.
If the company is serious about getting into the… “next growth phase” to enter, perhaps one is needed. Calling yourself an AI company may not be enough to succeed in this new era.
Axel Springer, the parent company of Business Insider, has reached a global agreement that allows OpenAI to train its models on the reporting of its media brands.
Read the original article Business Insider.
Read too
Your boss is afraid of AI – and this is why