Inflection AI will limit its free chatbot called Pi as it pivots to the enterprise

More signs that the consumer market is unlikely to be disrupted by startup, even exceptionally well funded ones, because overcoming the platform tax and structural advantages (such as Meta being able to scale their product on the back of WhatsApp and Facebook) is entirely impossible at this point.

Even OpenAI struggles here, forced to pay off Apple for exposure, forced by Meta to compete on “free” (meaning ads) and so we can expect many more enterprise pivots in the future.

In the short term, consumer focus was a way of scaling unreliable technology into the market - consumers have no issues retrying 20 times to get a perfect image - but enterprise adoption requires a much higher bar of service, reliability and crucially, legal certainty, all of which continue to be work in progress.

Incumbent market

Outside narrow verticals not significant enough or too expensive to spark Big Tech interest, there is very little room for startups to succeed in AI.

The cost of inference and training requires significant capital expenditure, the risk, fast moving nature of the market and apparent business struggles of startups make enterprises less than enthusiastic about product adoption.

The double whammy of platform taxes (such as Apples 30%) and infrastructure costs (such as payment rails and compute), many of which also flow into the pockets of big tech landlords combined with “compute preferential” investment conditions forced by many early hyperscaler investments into said startups saddle founders with extreme risk while enabling platforms to benefit “in any case”.

All in all, AI is a brutal incumbent environment and, without significant regulatory intervention, will stay that way for years to come.