By The New York Times
Call it the end of the beginning of the A.I. boom.
Since mid-March, the financial pressure on several signature artificial intelligence start-ups has taken a toll. Inflection AI, which raised $1.5 billion but made almost no money, has folded its original business. Stability AI has laid off employees and parted ways with its chief executive. And Anthropic has raced to close the roughly $1.8 billion gap between its modest sales and enormous expenses.
The A.I. revolution, it is becoming clear in Silicon Valley, is going to come with a very big price tag. And the tech companies that have bet their futures on it are scrambling to figure out how to close the gap between those expenses and the profits they hope to make somewhere down the line.
This problem is particularly acute for a group of high-profile start-ups that have raised tens of billions of dollars for the development of generative A.I., the technology behind chatbots such as ChatGPT. Some of them are already figuring out that competing head-on with giants like Google, Microsoft and Meta is going to take billions of dollars — and even that may not be enough.
“AI systems cost a lot of money to build, train, and operate. Flashy new products from behemoths like Microsoft, Amazon, and Google are giving people a taste of what AI can do, but the extremely high barrier to entry will keep AI from democratizing the way websites did in the early 2000s. Many great new AI products will be delayed or cancelled because the supporting infrastructure is simply not commercially viable. But we’re in the early stages of the AI industry and new products and services are sure to emerge (probably AI-based) that will reduce costs allow for more AI-products to hit the market.”
Paul Coble, intellectual property & artificial intelligence department chair at Rose Law Group, explains why A.I. start-ups face a rough financial reality check
