Microsoft and Google Face Open-Source Threat in the AI Economy

Meta Platforms, the parent company of Facebook, is teaming up with Microsoft to launch an open-source artificial intelligence (AI) model called Llama 2. This move reflects the increasing competition in the AI sector, which may limit the market dominance of giant tech companies like Microsoft and Google.

Meta Platforms and IBM are offering access to AI models that enable companies to develop their own software. They aim to attract customers away from Microsoft and Google, who provide less transparency about their AI models’ operations.

Llama 2, Meta’s new AI language model, will be released as free open-source software. It will be accessible through Microsoft’s cloud-computing platform, Amazon Web Services, and other providers.

Similarly, IBM recently partnered with open-source AI startup Hugging Face to launch Watsonx, a platform that allows clients to access various AI models for different tasks.

Although the success of IBM and Meta’s models with commercial customers remains uncertain, investors are currently less concerned. Microsoft’s stock reached new heights due to strong pricing for its AI-supported software, while Meta’s shares remained largely unaffected by the AI partnership announcement.

However, there are indications that Microsoft and Google’s dominance in the AI field may not be long-lasting. A leaked memo from a Google researcher suggested that the company had no durable competitive advantage in AI. The same concerns were raised about OpenAI, which Microsoft relies on for a significant part of its business.

It is speculated that Microsoft might consider acquiring OpenAI, even at a high price, to ensure its long-term sustainability. OpenAI was previously valued at approximately $29 billion.

A potential obstacle for those challenging Microsoft and Google is the cost involved. Microsoft’s Chief Technology Officer, Kevin Scott, warned that building an AI rival from scratch was economically unviable.

The resource gap between academia and industry is another factor favoring tech giants. According to Stanford University’s AI Index report, industry-produced machine-learning models significantly outnumbered those from academia in 2022.

Companies may choose to acquire AI startups or attract talent from established players to compete effectively. Tesla CEO Elon Musk, for example, has launched his xAI business and hired talent from Alphabet’s DeepMind.

The future of AI models appears to be shifting toward a more diverse landscape, offering a variety of options. While Microsoft and Google still possess advantages in terms of resources, cloud-computing capabilities, and talent, they will face increased competition as AI spending continues to rise in the coming years.

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Source: https://www.barrons.com/articles/microsoft-google-alphabet-ibm-meta-ai-stock-256bd9b0?mod=hp_DAY_Theme_1_3