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On Fri, 20 Dec, 4:01 PM UTC
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AI Giants Seek New Tactics Now That 'Low-Hanging Fruit' Is Gone
The two years since OpenAI supercharged the generative AI era with the introduction of ChatGPT have passed in a blur of technological one-upmanship. OpenAI and its primary competitors, Anthropic, Google and Meta, have released a flurry of cutting-edge artificial intelligence models, each more skillful than the last. It's now Silicon Valley gospel that more computing power, more data and larger models will lead to such fundamental improvements in AI that the technology will transform entire industries within the next few years. And yet, threats to the pace of development began emerging even before ChatGPT's second birthday. In 2024, OpenAI and two other leading AI companies hit stumbling blocks. At OpenAI and Google, some software failed to live up to internal expectations, while the timetable of a long-awaited model from Anthropic, a competitor built by former OpenAI employees, slipped after it had already been announced. If progress in generative AI slows in some durable way, it will bring into question whether the technology can ever achieve the more expansive promises the industry's top innovators have made for it. Identifying ways to propel the AI boom into its next stage will be the field's primary challenge in 2025.
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Generative AI Still Needs to Prove Its Usefulness
Generative AI took the world by storm in November 2022, with the release of OpenAI's service ChatGPT. One hundred million people started using it, practically overnight. Sam Altman, the CEO of OpenAI, the company that created ChatGPT, became a household name. And at least half a dozen companies raced OpenAI in an effort to build a better system. OpenAI itself sought to outdo GPT-4, its flagship model, introduced in March 2023, with a successor, presumably to be called GPT-5. Virtually every company hurtled to find ways of adopting ChatGPT (or a similar technology, made by other companies) into their business. There is just one thing: Generative AI doesn't actually work that well, and maybe it never will. Fundamentally, the engine of generative AI is fill-in-the-blanks, or what I like to call "autocomplete on steroids." Such systems are great at predicting what might sound good or plausible in a given context, but not at understanding at a deeper level what they are saying; an AI is constitutionally incapable of fact-checking its own work. This has led to massive problems with "hallucination," in which the system asserts, without qualification, things that aren't true, while inserting boneheaded errors on everything from arithmetic to science. As they say in the military: "frequently wrong, never in doubt." Systems that are frequently wrong and never in doubt make for fabulous demos, but are often lousy products in themselves. If 2023 was the year of AI hype, 2024 has been the year of AI disillusionment. Something that I argued in August 2023, to initial skepticism, has been felt more frequently: generative AI might turn out to be a dud. The profits aren't there -- estimates suggest that OpenAI's 2024 operating loss may be $5 billion -- and the valuation of more than $80 billion doesn't line up with the lack of profits. Meanwhile, many customers seem disappointed with what they can actually do with ChatGPT, relative to the extraordinarily high initial expectations that had become commonplace. Furthermore, essentially every big company seems to be working from the same recipe, making bigger and bigger language models, but all winding up in more or less the same place, which is models that are about as good as GPT-4, but not a whole lot better. What that means is that no individual company has a "moat" (a business's ability to defend its product over time), and what that in turn means is that profits are dwindling. OpenAI has already been forced to cut prices; now Meta is giving away similar technology for free. As I write this, OpenAI has been demoing new products but not actually releasing them. Unless it come outs with some major advance worthy of the name of GPT-5 before the end of 2025 that is decisively better than what their competitors can offer, the bloom will be off the rose. The enthusiasm that propped up OpenAI will diminish, and since it is the poster child for the whole field, the entire thing may well soon go bust.
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Leading AI companies like OpenAI, Anthropic, and Google encounter obstacles in development, raising questions about the future of generative AI and its ability to deliver on ambitious promises.
The rapid progress in generative AI that began with OpenAI's ChatGPT in November 2022 is showing signs of deceleration as leading companies in the field encounter significant challenges. OpenAI, Anthropic, Google, and Meta, which have been at the forefront of AI innovation, are now grappling with the complexities of advancing their technologies beyond current capabilities 1.
In 2024, several key players in the AI industry faced setbacks. OpenAI and Google experienced failures in their software to meet internal benchmarks, while Anthropic, a competitor founded by former OpenAI employees, delayed the release of a highly anticipated model 1. These incidents have raised questions about the sustainability of the breakneck pace of AI development that the industry has maintained since ChatGPT's debut.
As the "low-hanging fruit" in AI development has been exhausted, companies are now confronted with the task of making substantial improvements that go beyond incremental advancements. The industry's prevailing belief that more computing power, data, and larger models will lead to transformative AI capabilities is being put to the test 1.
Despite the initial enthusiasm surrounding generative AI, critics argue that these systems still face fundamental limitations. The core technology, described as "autocomplete on steroids," excels at predicting plausible-sounding content but struggles with deeper understanding and fact-checking 2.
One of the most pressing concerns is the problem of "hallucinations," where AI systems confidently assert false information. This issue, combined with errors in basic tasks like arithmetic and science, has led to growing skepticism about the practical applications of generative AI in its current form 2.
The AI industry is also facing economic hurdles. OpenAI's estimated operating loss of $5 billion in 2024 and its inflated valuation of over $80 billion highlight the disconnect between market expectations and actual profitability 2. Moreover, the similarity in capabilities among competing models has led to price cuts and even free offerings, potentially eroding the competitive advantage of individual companies.
As the industry moves into 2025, the primary challenge for AI companies will be to demonstrate tangible progress and practical applications that justify the massive investments and hype surrounding generative AI. The ability to overcome current limitations and deliver on more ambitious promises will be crucial for maintaining investor confidence and public interest in the technology 12.
The outcome of these challenges will have far-reaching implications for the future of AI development and its potential to transform industries. As companies seek new ways to advance their technologies, the coming year will be critical in determining whether generative AI can evolve beyond its current limitations and fulfill its promised potential 12.
Reference
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Recent reports suggest that the rapid advancements in AI, particularly in large language models, may be hitting a plateau. Industry insiders and experts are noting diminishing returns despite massive investments in computing power and data.
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14 Sources
China-based DeepSeek challenges AI giants with its R1 model, sparking discussions about the commoditization of generative AI and the future of the industry.
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7 Sources
OpenAI's next-generation AI model, ChatGPT-5 (codenamed Orion), is encountering significant hurdles in surpassing its predecessor, GPT-4. This development raises questions about the future of AI scaling and progress in the field.
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11 Sources
An analysis of OpenAI's diverse AI projects and their impact on the tech industry, questioning whether the company's broad focus is a strength or a potential weakness.
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2 Sources
OpenAI CEO Sam Altman's recent statements about achieving AGI and aiming for superintelligence have ignited discussions about AI progress, timelines, and implications for the workforce and society.
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20 Sources
