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Takeaways from AI Evolution Webinar

Published on September 20, 2024

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Dennis DeBusschere

Brian Herlihy

Kevin Brocks

Sophia Wang

Last Thursday we hosted our second webinar with Sultan Meghji, co-founder and CEO of AI Pioneer Frontier Foundry, an AI platform with unique features to build specific deterministic systems and operate in a secure and highly regulated environment. You can find the replay HERE. A short intro to the topics we covered last time are HERE.

Highlights of this webinar…

Return on Investment

The single biggest takeaway from this webinar is a focus on AI ROI. This is a simple but critically important lens to value AI tools. Sultan pointed out that more and more companies are finding initial investments in big farms and GPU infrastructures are not yielding high enough returns. As a result, they are now scaling back investment. Our quant work shows the percent of companies mentioning specific AI Usage cases AI dropped last quarter. Even within Tech names, AI Usage mentions dropped from 65% to 35%.

The models that work (meaning deliver a sufficiently high ROI) are small, localized, specialized, quantitative models. Not the large scale LLMs on public clouds. Companies need models they can upload private data to with minimal/no risk and get deterministic and explainable results. That combination drives higher ROI and will clear coming regulatory hurdles. Companies will find it increasingly untenable to investments into technologies that fail at security, regulation, accuracy, and explainability. LLMs are great for interfacing with but are not adequate for the work that will drive productivity boosts. Small, localized models are.

So Why is Investment Flowing to Large Models on Public Clouds?

Sultan argues that most of the large enterprise tech companies are incentivized to drive business to their cloud and are using AI products to do so. Demand for these products will fall. Some companies, AAPL most notably, are starting to emphasize localized AI. That will be an interesting trend to watch.

The shift in investment comes first as public companies pull back on AI spending because of bad ROI. Part 2 is investors starting to demand a higher ROI.

There will be winners and losers.

Labor and Productivity

We get a lot of questions on what AI will do to the labor market. Sultan thinks the effect will not be felt via mass layoffs, but rather greater output out of employees. People cannot be replaced, but they will be made more effective.

And last webinar, we covered how since the cost of AI tools is low, small companies can participate in the productivity boom. That’s a change in recent trends, where large companies were reaping most of the productivity rewards from economies of scale/monopolistic power. And macroeconomically, the service sector has been a drag on productivity. AI can help flip that.

For more on Frontier Foundry please find a link to their Substack, main page, and products page.

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