Generative AI

The New Disruptive Paradigm: Generative AI

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Published on: Feb. 28, 2023, 6:36 p.m.


  1. Foreword: The Era of AI disruptors

  2. Generative AI: An Intro

  3. Foundation Models

  4. Closed-Source: Proprietary Generative AI

  5. Open-Source Direction

  6. Addressable Market Size

  7. Venture Capital (VC): the Excitement

  8. Capital Investments per Segment and Category

  9. Application Layer: A new Universe for Startups

  10. Future Direction

  11. Ecosystem


The Era of AI disruptors

In recent years, economic disruption has been the norm worldwide. A global pandemic, changing worker needs, and the general realization that none of us can continue to do business as usual. Artificial Intelligence has a unique and powerful role to play in meeting many of the challenges presented to us today. we are now living in an age in which massive data availability and models offer the necessary foundations to fuel truly transformational applications and rapid innovation using AI.

While witnessing these rapid changes, we can also recognize the opportunities that existing challenges present. Yet business leaders have often failed to recognize the true impact that AI can have and the enormous potential it presents.

Today’s race is no longer about adopting AI or automating processes for efficiency. It is now about realizing the massive economic disruption that AI can cause. For instance, to quote a simple example: using simple text in the form of a sentence, an image can be created, and from a couple of sentences, a customized movie can be produced. That is “a black swan event” that comes once in a decade and redefines the boundaries of the “information economy”. More importantly, as we discuss Generative AI technology in this report and its enormous potential, we will identify the major players in the field, the direction it is headed in and the area within the field likely to attract the most venture capital investments in the future. We will infer from the direction of venture investments, which is the economic segment that is likely to flourish in coming years.

Gen AI disrupting the Film and Gaming Sub-sectors within the Media Industry

A revolution is occurring within the media industry, spurred by ChatGPT and large language models, with Stable Diffusion being a key player. A new emerging pattern divides Generative AI players into a foundational layer group and another application layer one. This delimits the playing field going forward, as was the case in the past with “operating systems” being developed as environments containing programs and applications. Furthermore, in Section 2, Open-source versus Closed-source Gen-AI is discussed in detail and the advantages of the former over the latter are made evident, including the cost effectiveness of Open-source, resulting in granting enterprises the ability to start small and scale up when possible. Also, since Open-source code is freely available, it allows for public collaboration to address issues and provide support. More importantly, this report estimates the Total Addressable Market (TAM) within the media industry for Stable Diffusion (total potential revenue that can be captured by Stable Diffusion due to the economic disruption caused by GenAI). Spending in the media sector rests on three major pillars: Customer Spending, advertising, and internet/online access, with revenues split almost evenly currently and each pillar generating around 30% of revenues. The total size of the media market is around USD 2.5 trillion. It is split into multiple segments, with films and gaming being the dominant ones.

We have recorded the impact of Stable Diffusion in the films sub-segment through its recent ability to capture frame-by frame animation, and the impact on gaming through the new excellent “ideation” capability of Generative AI, which is likely to radically transform the production of games, expediting the process and massively reducing costs. Furthermore, using a top-down approach to quantify the TAM, the media and entertainment sector has been divided into subsegments and further niches within the subsegments to recognize, the total potential revenue that can be captured by Stable Diffusion. We found that while the TAM stands at USD 2.5 Trillion in 2023, the potential for economic disruption by GenAI amounts to nearly USD 1.07 trillion at present and is expected to grow to USD 1.4 trillion in 2025 (p7). Finally, through our review of the major players in Generative AI, we detail the Venture Capital investments in the field as a barometer of the future potential of the field. We identified fund flows per segment, category, funding rounds and geography (see Section 9). As per our knowledge and to date, this is the most exhaustive look into the purely Generative AI ecosystem.

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Stability AI, a collaboration with media creation company RunwayML, Heidelberg University researchers, and the research groups, Eleuther-AI and LAION. Created in 2020, realizing the advent of new AI technologies and more the lack of an organized “Open-source” environment in the AI community, Stability was to create an open ecosystem where further models can be built upon the latent space concept.
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