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More of a beginning than an end

“The race in the field of generative artificial intelligence (AI) is decided. Start-ups hardly stand a chance against the technology of OpenAI (and thus Microsoft) and Google.” If most of the German and international media had their way, founders and investors would withdraw from the AI market immediately. However, as is often the case in life, it is worth taking a closer look.

There are two arguments for the expected dominance of Microsoft and Alphabet’s Google. First, both have amassed huge amounts of (user) data with which they can train their AI. Second, they are willing to invest in their success. And not just in terms of billion-dollar acquisitions or investments. A query to the ChatGPT chatbot costs two cents, about seven times as much as a “normal” search on Bing or Google. Analysts at Morgan Stanley estimate that if Google were to use AI to process 50% of its search volume next year, it could cost up to $6 billion.

No European start-up or growth company has that much money. And they don’t need to, as Aleph Alpha has shown. The German start-up has developed an AI chatbot that recently performed as well as ChatGPT in a standardized efficiency test. But instead of competing against two tech giants for private users, the Heidelberg-based company’s solution is targeting companies and public administrations.

German and European AI solutions have an important advantage in this field, as a study commissioned by the German Federal Ministry for Economic Affairs found back in 2018: a leap of faith. When it comes to their internal operations, both companies and the public sector are reluctant to hand over their data to a U.S. company that might be less strict about data protection or processing (to its own advantage).

So, will the motto for European AI start-ups in the future be “avoid and evade”? Absolutely not! Even the U.S. giants are vulnerable, as shown by DeepL, whose AI-supported online translator delivers significantly better results than the competing service Google Translate. As a result, the Cologne-based company was valued at one billion euros in its most recent funding round in January this year, making it a so-called unicorn. DeepL is no exception: Five of the eleven European companies that have achieved unicorn status in the last six months are operating in the field of AI.

Microsoft – or OpenAI – and Google are likely to become major players in AI, and given the technology’s use in the massive search market, it will be difficult to keep up with them. At the same time, artificial intelligence offers so many opportunities and applications that it would be fatal not to start a business or invest in it. German and European companies are far from playing catch-up. The race has only just begun.

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