AI startups need big tech. This could be a problem

ChatGPT has taken the world by storm. But the AI ​​chatbot also needed massive cloud computing resources to do so. So will any challenger hoping to outpace it, such as the startup Anthropic’s Claude and other ventures looking to take advantage of “generative AI,” which Bill Gates recently called “as important as a computer as Internet”. “

While users are captivated by AI programs that can answer questions and generate images in seconds, “the computational cost is impressive,” noted Sam Altman, CEO of ChatGPT developer OpenAI, in December.

That helps explain why this week OpenAI released ChatGPT Plus, a $20 monthly subscription that provides faster response times and better access to the AI ​​chatbot when it’s otherwise down due to traffic.

But it also points to the need for AI startups like OpenAI and Anthropic to partner with the handful of tech giants that can provide them with the hugely expensive cloud computing resources they need to operate. And such arrangements raise concerns among antitrust regulators. They are “exactly the type of scenario that the FTC said it would focus on,” William Kovacic, who previously led the FTC, told Financial Times.

“There is increased concern about how large information services firms are limiting the ability of new generations of competitors to emerge,” added Kovacic, who now teaches antitrust law at George Washington University.

OpenAI is now deeply involved with Microsoft, which announced last month that it would invest billions in the venture. The tech giant also invested $1 billion in 2019, then quietly added another $2 billion in 2021.

This week, Anthropic announced a $300 million investment from Google, giving the latter a 10 percent stake in the venture. In late November, another generative AI startup, Stability AI — users of its tools can generate impressive images from text prompts — announced that it had chosen Amazon Web Services as a partner.

Such deals give tech giants an insight into the staffing and capabilities of such startups, but there’s still nothing to stop them from working on similar products themselves. Google subsidiary DeepMind is reportedly preparing to launch Sparrow, another competitor to ChatGPT.

For startups, jumping from one cloud provider to another is difficult. Many can find themselves essentially locked into one of these even when there is no exclusive agreement.

“Some academics who want to move into their own startup, their first conversation is with cloud providers before they even hire developers because they know it’s prohibitively expensive,” Yellow Dog chief executive Tom Bies told the FT. “It’s crucial.”

Beese’s firm helps customers switch between cloud services, but he noted that he knows of several alliances between AI startups and cloud providers formed before the products are even launched.

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