Just about every day, a startup raises hundreds of millions to build an LLM. But the real winner in the LLM race won’t be a startup.

LLM’s Are Becoming Commoditized

Every morning, I launch a browser set to open to 3 tabs: GPT-4, Bard, and a model from a startup called Phind. I play them off each other, working toward the best result.

Turns out, they’re pretty similar.

Phind is a little more concise, Bard is better with video, and ChatGPT is good at finding sources. But the differences are small.

The LLM itself is starting to feel like a commodity.

That doesn’t mean LLM’s aren’t awesome. But it does mean that in themselves, they’re not defensible.

Cloud Computing + LLM’s Is the Product

LLM’s may not be a defensible product in themselves. But Big Tech is hard at work turning them into a complete product.

Satya Nadella has poured $13 billion into OpenAI. Microsoft quickly integrated OpenAI’s tech into Azure, Microsoft’s Cloud Computing platform.

If Azure offers an easier and better way to give your app AI features, you’re going to use Azure. This is the chance Nadella’s been looking for to dethrone AWS and become the top dog in Cloud computing.

Even small startups have created LLM’s. But starting a cloud computing platform takes massive resources. Building a single AWS data center can cost over $2 billion.

The costs and complexity of running a cloud platform mean that only a handful of tech giants can do it.

The End Game for LLM Startups

If LLM’s are becoming a commodity, the price will approach the cost of doing a query. With margins cut to zero, LLM companies need a different offering in order to stay alive.

A big licensing agreement with a cloud computing provider is perfect. Acquisition is probably the best exit available, if the FTC will allow it.

Expect to see Llm Startups racing to ink a partnership with a big cloud company. The problem is, most already have a partner.

Microsoft has OpenAI, Google is using its own models, and AWS has a close relationship with Anthropic. This leaves most LLM startups out in the cold.

Wrap-Up

When ChatGPT came out last year, I was visiting family back home in Wisconsin. I’m embarrassed to admit I spent half the trip playing with it.

It was one of the most incredible pieces of technology I’ve ever seen. But although ChatGPT is as good as ever, it now has tons of competition.

Expect tough times ahead for most LLM startups. They may have incredible tech — but so does everyone else.

Who do you think will win in AI? Leave a comment and let us know!

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