A Scale AI exec said AI foundational labs are like movie studios — they make big franchise investments that quickly become irrelevant

One exec is comparing the business model of companies like OpenAI and Meta AI to Marvel Studios.

On an episode of the “a16z Podcast” published on Tuesday, Scale AI’s head of product for enterprise applications, Ben Scharfstein, said his most controversial opinion on AI is that AI foundational companies are more like content studios than software companies.

“My hottest take is I think the right way to think about foundation labs is that they’re like movie studios,” he said. “What I mean by that is they invest a ton of money in blockbusters that have a relatively short time span to pay them back.”

Scharfstein heads Scale AI’s enterprise applications business, which builds and deploys generative AI solutions for other companies. Scale AI, which received a $14.3 billion investment from Meta in June, is better known for its data annotation business, which helps Big Tech clients like Google and Meta improve their AI chatbots.

The exec compared large language model companies to Hollywood studio Marvel, famous for its blockbuster superhero movie franchises.

“Marvel, you’re investing in ‘The Avengers’ and you invest a billion dollars in it and then it maybe pays you back over the next 18 months,” he said. “It’s pretty irrelevant after that.”

Much like “The Avengers,” companies like OpenAI are also building franchises with GPTs that are built off the previous models, he said.

“It’s just very similar. You’re able to turn that franchise maybe into a video game and then maybe it is more like software,” he said. “But actually right now the model companies look more like a content studio than they do like a software company.”

Scale AI builds its custom generative AI solutions using models including OpenAI’s GPT-4, Cohere’s Command, and Meta’s Llama 2, according to its website. In June, OpenAI said it hit $10 billion in annual recurring revenue, less than three years after launching its popular ChatGPT chatbot.

ScaleAI also relies on these frontier labs and has worked with nearly every LLM company, including Meta, OpenAI, and Google’s DeepMind for its AI training business, according to an internal client dashboard Business Insider reviewed.

Last month, Scale AI reduced its 1,400-person workforce by 14% in cuts that affected 200 employees in its generative AI division.

In an internal email viewed by Business Insider, interim CEO Jason Droege said Scale AI ramped up capacity “too quickly over the past year” on GenAI, leaving other divisions, like its public sector units, “under-resourced.”

ScaleAI did not immediately respond to a request for comment.

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