AI foundation models set the stage for Big Tech‘s battle-of-the-century | State of the Cloud 2024

From Bessemer Venture Partners, Janelle Teng, Sameer Dholakia, and Kent Bennett dig into the biggest debate in tech today — who will win the battle over AI foundational models?

State of the Cloud 2024 is now out — https://www.bvp.com/atlas/state-of-th...

Top takeaways:
— Foundation models are seen as essential for downstream AI applications and tooling.
— In 2023, foundational model companies captured over 60% of total AI venture funding, raising $23 billion at a market cap of $124 billion.
— Big Tech companies (Microsoft, Google, Amazon, NVIDIA, Oracle) are heavily investing in foundational model companies and developing their own models (e.g., Google’s Gemini, Meta AI’s Llama).
— Corporate VCs represented 90% of private GenAI fundraising in 2023, up from 40% in 2022.

Three different realities could come to life:
— Reality 1: AI models become commoditized, with the ultimate value captured by compute and cloud service providers.
— Reality 2: A few AI Model Giants, supported by Big Tech and corporate VCs, will dominate the foundational model ecosystem.
— Reality 3: A diverse AI model economy, similar to the variety in the potato chip market, with many companies thriving due to differentiated use cases.

Bessemer POV? A slight majority predicts closed-source models will dominate, with AI Model Giants eventually splitting the economic pie. Cloud giants are expected to leverage their resources to influence the battle in their favor, with frontrunners like Microsoft/OpenAI, AWS/Anthropic, Google/Gemini, and Meta/Llama leading the race.