Contrary Research Rundown #72
Questioning the future of generative AI, plus new memos on Brex, Grammarly, and more
Research Rundown
Generative AI continues to drive headlines, buzz, and massive amounts of capital. Most recently, Sam Altman is in talks to raise trillions (not a typo) to “revolutionize” the chips business. Meanwhile, the CEO of Amazon’s AWS business unit, Adam Selipsky, described the energy around generative AI as “dramatically overhyped,” and compared it to the dotcom bubble.
The AI landscape, unlike categories like sales tech, or marketing tech, spans a dramatically diverse landscape of business models. From foundation model platforms to GPT wrappers to core applications. Questions have come up about the long-term margins and economic potential for many of these businesses. Given the space is changing so rapidly, articulating the steady state potential of these technologies can be difficult.
Even Adam Selipsky, while believing the space is overhyped, still described the technology as valuable. But the excitement around the specific companies brings with it a cost:
“Many companies and organizations are struggling to understand, ‘Out of these hundred pilots or proofs-of-concept that I have going on, which ones do I take into production?’ And they're starting to see that it can be very expensive once they go into production.”
As we consider the potential future of the space, there are some core questions that may shape some of these ongoing dynamics:
Future Dominant Architecture: In our interview with Aidan Gomez, the CEO of Cohere, he mentioned that, if in 5 years, the dominant AI architecture is still transformers, he would be very disappointed. So what will take its place? And how will that change the equation for AI going forward?
Durability of Specific Models: A number of people have continuously pointed out the capital intensity of developing specific models (including us.) And competition continues to be fierce. Open and closed source models alike are vying for the top slot on various leaderboards, including Abacus AI, Mistral, Anthropic, OpenAI, and Google’s Gemini. Will prior models still find use cases that will allow companies to amortize those costs over time? Or are they all a flash in the pan that will ultimately become a race to the bottom?
Availability of Training Data: We’ve written before about how knowledge communities, such as StackOverflow, have continued to see declining engagement from power users because LLM output is so good. But models rely on user-generated content from platforms like StackOverflow and Reddit to train their models. What happens when we push the limits of user-generated data? Does the focus shift to synthetic data? Or do we increasingly move away from language models that are so large?
These are just a few of the questions that will increasingly define the generative AI category. More critically, the question will become how each company playing in this space will respond to the ever changing landscape?
ChartHop pulls together disparate data sources via integrations with company-wide systems such as payroll to help companies unlock previously hidden insights. To learn more, read our full memo here.
Grammarly is a digital writing assistant that harnesses AI to offer grammar checking, style editing, and clarity improvements for users. To learn more, read our full memo here and check out some open roles below:
Legal Intern - San Francisco, CA
Software Engineer, Full-Stack (Quality Tools) - Hybrid USA or Canada
Following the launch of its banking, expense management, and AI products, plus the Empower platform, Brex is positioning itself to both move upmarket to enterprise customers as well as capture more of customers' business spend on its platform. To learn more, read our full memo here and check out some open roles below:
Senior SEO & Growth Manager - U.S. Remote
Support Specialist - Salt Lake City, Utah
Check out some standout roles from this week.
Hex | Remote, East Coast - Sales Engineer, FullStack Engineer, Product Expert, Product Security Engineer
Baseten | Remote/San Francisco/New York City - Lead Software Engineer (Infrastructure), Product Marketing Manager
Rilla | New York City - Software Engineer, Senior Software Engineer, Senior Software Engineer - Backend
Squint | Remote - Software Engineer, Product Designer
Abridge | Remote - Senior Software Engineer (FullStack), Senior Platform Engineer (Terraform, GCP, K8s), Lead Data Engineer (Machine Learning)
Coactive | San Jose, CA - Sr. Software Engineer - Full Stack, UX Designer
At Contrary Research, we’ve covered a number of vertical software companies, including ServiceTitan, Dutchie, Boulevard, Mews, ShopMonkey, and more. Tidemark, who has produced the Vertical SaaS Knowledge Project, is conducting their first annual SMB and Vertical SaaS Benchmarks Survey. Any vertical SaaS operators can fill out the survey here.
A new open-source AI model is topping the charts. Abacus AI’s Smaug-72B is reportedly more performant than other open source models like Mistral, or models from OpenAI and Google. For more on open source AI, check out our deep dive.
Speaking of open source AI, Yann LeCun, the Chief AI Scientist at Meta, shared his perspective on how open source can shape the future of AI.
Flexport’s struggles continue. The company is reportedly having a hard time serving Apple as one of its largest customers. Flexport supposedly burned $300 million of cash in the first half of 2023, and is losing $2 million per month on Apple’s air freight alone.
Scientists near Oxford reportedly set a record for nuclear fusion, generating “69 megajoules of fusion energy… enough to power roughly 12,000 households.” For more on nuclear fusion, check out our memo on Helion Energy.
Pirate Wires dug into “diversity enhanced” hiring practices at companies like Reddit, Stripe, Discord, and Grammarly, in part supported by recruiting software like Gem.
Lab grown meat has been pulled from the few restaurants that served it, leaving the future of the category, and companies like Impossible Foods, up for debate.
Privacy-first productivity platform, Skiff, was acquired by collaboration startup Notion. For more on Notion, check out our memo.
Productivity startup ClickUp has acquired calendar-app startup Hypercal, further expanding the platform’s exposure to other productivity categories, and competing with startups like Calendly.
Mario Gabriele published a breakdown of Airwallex, and the opportunity in international payments. For more on the company, check out our memo.
Battery Ventures published its State of Marketplaces report highlighting businesses such as Instacart.