The AI revolution, it is becoming clear in Silicon Valley, is going to come with a very big price tag.
Since mid-March, the financial pressure on several signature artificial intelligence start-ups has taken a toll. Inflection AI, which raised $US1.5 billion but made almost no money, has folded its original business. Stability AI has laid off employees and parted ways with its CEO. And Anthropic has raced to close the roughly $US1.8 billion gap between its modest sales and enormous expenses.
Some startups are already figuring out that competing head-on with such giants as Google, Microsoft and Meta is going to take billions of dollars.“You can already see the writing on the wall,” said Ali Ghodsi, CEO of Databricks, a data warehouse and analysis company that works with AI start-ups. “It doesn’t matter how cool it is what you do – does it have business viability?”
The challenges hitting many newer AI companies stand in contrast to the early business results at OpenAI, which is backed by $US13 billion from Microsoft. The attention it has generated with itshas allowed the company to build a business charging $US20 a month for its premium chatbot and offered a way for businesses to build their AI services with the technology that drives its chatbot, which is called a large language model. OpenAI pulled in around $US1.
Like OpenAI, Anthropic has turned to partnerships with large, established tech companies. Its CEO, Dario Amodei, has been courting customers on Wall Street, and it recently announced that it was working with Accenture, the global consulting company, to create custom chatbots and AI systems for companies and government organisations.
It was on track to generate about $US60 million in sales this year against about $US96 million in costs from its image generation system, which has been available to customers since 2022, a person familiar with its business said.Stability AI’s financial position looks better than those of language-model makers like Anthropic because developing image-generation systems is less expensive, AI investors said. But there’s also less demand to pay for images, so the sales prospects are more uncertain.
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