a16z partners Guido Appenzeller and Matt Bornstein join Derrick Harris to discuss the state of the generative AI market, about 18 months after it really kicked into high gear with the release of ChatGPT — everything from the emergence of powerful open source LLMs to the excitement around AI-generated music.
If there's one major lesson to learn, it's that although we've made some very impressive technological strides and companies are generating meaningful revenue, this is still a a very fluid space. As Matt puts it during the discussion:
"For nearly all AI applications and most model providers, growth is kind of a sawtooth pattern, meaning when there's a big new amazing thing announced, you see very fast growth. And when it's been a while since the last release, growth kind of can flatten off. And you can imagine retention can be all over the place, too . . .
"I think every time we're in a flat period, people start to think, 'Oh, it's mature now, the, the gold rush is over. What happens next?' But then a new spike almost always comes, or at least has over the last 18 months or so. So a lot of this depends on your time horizon, and I think we're still in this period of, like, if you think growth has slowed, wait a month and see it change."
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