Springboard Series: Competition is booming up and down the AI stack—the competitive landscape
The generative AI revolution is raising new questions about competition, market concentration, and American innovation. This flurry of change can seem complicated, but in fact emerging AI innovations are contributing to a wildly competitive ecosystem up and down the AI “stack.”
First, a brief primer on the state of competition in the tech space:
Investment in AI startups is mushrooming as tech entrepreneurs and investors sense an opportunity to disrupt tech firms, Benedict Evans writes. The startup accelerator Y Combinator funded more AI startups in their Summer 2023 fundraising batch than the total number of startups they funded in many previous cycles.
Chart by Benedict Evans, reproduced with permission of the author
Ironically, these startups are launching their industry-altering products on research and innovations that tech firms developed. The “T” in “ChatGPT” stands for “Transformer,” an innovation in modeling language processing introduced by a Google Brain team in 2017 that ChatGPT now uses.
The lesson is one we learn over and over again in dynamic tech markets, says Amjad Masad, CEO of Replit. “Disruption, where the incumbent advantage disappears overnight, is so consistent in tech—and insiders often see it coming and still react too late—that you should assume it’s a law of nature.”
As we’ve written before, change is the only constant in tech, and, beginning with AI applications, startups and established companies are competing intensely and driving innovation.
A promising competition boom arrived at the application layer
While OpenAI and Anthropic may have been the first big developers on the scene, they are now accompanied by hundreds of competitors. These competitors are taking on OpenAI and Anthropic directly and quickly innovating in areas well beyond what those companies are doing.
Opportunities to innovate with AI are everywhere, from education to law to healthcare, according to a Sequoia Capital analysis. What’s most notable is that every niche is intensely competitive. In the web search space, ChatGPT and its peer Anthropic already face strong competitors offering differentiated functionalities:
— Last November, the startup Perplexity released an updated chatbot that, unlike ChatGPT and other established models, can draw from the internet in real time.
— In late January, You.com updated its AI-powered search engine to answer complex, multi-step questions.
— Also in January, the startup The Browser Company debuted ArcSearch, an AI-powered browsing app that can generate whole webpages on real-time events.
In the healthcare application space, the number of companies and sub-specializations that already exist are staggering. According to AI Checkup, multiple AI startups are already competing in fields from pharmaceutical research to surgical robotics to patient record keeping.
There’s also no indication that this boom in startups is stopping anytime soon. In a recent request for startups, the startup accelerator Y Combinator listed several promising new fronts of startup investment, including machine learning software for robots, AI physics simulator models, explainable AI, and LLMs to streamline back office processes.