Thread by @RamaswmySridhar

1/ AI exploded on the scene at the end of 2022, with applications like @OpenAI's ChatGPT taking the world by storm.

2023 is poised to be the most exciting year of AI yet! 🎉

Here's mine and @vivek7ue's look at the lay of the land + what might happen next...

👀🧵

2/ Let's first dive into what the industry looks like today.

We see 5 main categories:
⭐ Foundation Model Players
⭐ AI Frontend Startups
⭐ Copilot/LLM for X Companies
⭐ Tooling Companies
⭐ Big Compute Clouds

3/ ⭐ Foundation Model Players

These include @AnthropicAI, @OpenAI, @CohereAI, and @AI21Labs. All of these players will all have instruction following models that are more or less substitutes for each other. Their businesses will all be based on an API model.

4/ Their APIs will all converge to:
➡️ Generations
➡️ Embeddings
➡️ Fine tuning
➡️ Classification

They will all:
☑️ Recruit AI frontend startups
☑️ Use an “index YCombinator” business model
☑️ Outsource GTM to AI frontend startups

Quality of model 🤝 Loyal customers

5/ ⭐ AI Frontend Startups

These are companies like @jasper_ai_ and @copy_ai that are vertical specific “prompt engineering layers” on top of the foundation model players.

These companies will use APIs from the foundation model players to stitch together end user solutions.

6/ 💪 Strengths = User focus + GTM

Most of YCombinator’s 2023 vintage will be companies of this form (a large number being marketing tech companies).

They'll look like a dressed-up version of the enterprise SaaS companies from the last decade, w/ an “AI intelligence layer”.

7/ ⭐ Copilot/LLM for X Companies

These will include:
📌 Original CoPilot for programmers (@github / MSFT)
📌 LLM for Chatbots (@character_ai, @inflectionAI)
📌 LLM for RPA (@AdeptAILabs)
📌 LLM for search (@Neeva) + many others

8/ These will also include OG LLM companies like @cresta (enterprise chatbots) & @LiltHQ (translation).

All these companies will bet that task-specific LLM tech + deep understanding of user + product is how the market is won.

They'll need big capital raises to pull it off. 💰

9/ ⭐ Tooling Companies

These are classic shovel providers in a gold-rush and will include:
↪️ Labeling companies (@scale_AI, @HelloSurgeAI, @SnorkelAI)
↪️ Training infra companies (@MosaicML, Stronger Compute)
↪️ Inference infra companies (@gooseai_NLP) + many others

10/ ⭐ Big Compute Clouds

These companies (like GCP, AWS, @Azure and @Oracle) will:
✅ Wake up to the business opp that LLMs provide
✅ Compete aggressively to go up the value chain beyond being just “GPU compute providers”

Azure threatens to have run away w/ this game already.

11/ Over the next year, we expect to see multiple battles, consolidation, and splintering across these categories.

Stay tuned for tomorrow where we share our top predictions on how the industry will shake out in the year ahead…