In a recent podcast,Cohere Aidan Gomez, CEO of AI, said that the current competition in the AI industry is very 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 each year in training large models like GPT-4 and Claude, but due to fierce price competition, the overall business has become extremely fragile.
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Gomez pointed out that the current price war of AI models has almost eliminated the marginal profits of the industry. "If you rely solely on the sales model, the days ahead will be very difficult." He said that the "sales model" here refers to the service of providing API access to these AI models to developers, and in this field, companies such as OpenAI, Anthropic, Google and Cohere are facing similar difficulties.
AI ModelsResearch and development companies are facing a challenge, that is, while continuously improving model performance, they also have to pay large fees to hardware manufacturers such as NVIDIA. At the same time, in order to retain users, companies have lowered the price of model access, and open source models from companies such as Meta are free for use.
Gomez also mentioned that although the current AI model faces huge losses, he believes that Cohere's AI model will be an attractive business in the long run. In order to generate revenue in the short term, launching related products is also a viable path. He emphasized that the current AI model business is actually operating at a loss.
For giants like Microsoft and Google, they can afford these losses through financial subsidies, but for startups, this is not the case. Cohere is one of the few startups that are still developing cutting-edge AI models, along with OpenAI, Anthropic and Mistral. Many similar startups, such as Inflection and Character.ai, have been acquired by large cloud service providers, making their businesses unprofitable while retaining their technology.
Gomez also mentioned that relying on cloud service providers is not a good business model. He pointed out that venture capitalists only care about returns, while cloud service providers may have other motivations. "This is very dangerous for startups."
Although the industry is full of expectations for the innovation of AI models, it is still unknown when they can achieve profitability. And obviously, not every AI startup can wait until that moment.