Why AI will not create unimaginable fortunes

From my Bloomberg column from last week:

A small number of AI services, possibly even a single one, likely will end up better than the others for a wide variety of purposes. Such companies might buy the best hardware, hire the best talent and manage their brands relatively well. But they will face competition from other companies offering lesser (but still good) services at a lower price. When it comes to LLMs, there is already a proliferation of services, with Baidu, Google and Anthropic products due in the market. The market for AI image generation is more crowded yet.

In economic terms, the dominant AI company might turn out to be something like Salesforce. Salesforce is a major seller of business and institutional software, and its products are extremely popular. Yet the valuation of the company, as of this writing, is about $170 billion. That’s hardly chump change, but it does not come close to the $1 trillion valuations elsewhere in the tech sector.

OpenAI, a current market leader, has received a private valuation of $29 billion. Again, that’s not a reason to feel sorry for anyone — but there are plenty of companies you might not have heard of that are worth far more. AbbVie, a biopharmaceutical corporation, has a valuation of about $271 billion, almost 10 times higher than OpenAI’s.

To be clear, none of this is evidence that AI will peter out. Instead, AI services will enter almost everyone’s workflow and percolate through the entire economy. Everyone will be wealthier, most of all the workers and consumers who use the thing. The key ideas behind AI will spread and be replicated — and the major AI companies of the future will face plenty of competition, limiting their profits.

In fact, AI’s ubiquity may degrade its value, at least from a market perspective. It’s likely the AI boom has yet to peak, but the speculative fervor is almost palpable. Share prices have responded to AI developments enthusiastically. Buzzfeed shares rose 150% in one day last month, for example, after the company announced it would use AI to generate content. Does that really make sense, given all the competition BuzzFeed faces?

It’s when those prices and valuations start falling that you will know the AI revolution has truly arrived. In the end, the greatest impact of AI may be on its users, not its investors or even its inventors.

We’ll see how those predictions hold up.


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