Elon Musk reacts to falling prices for old artificial intelligence models

Elon Musk reacts to falling prices for old artificial intelligence models

Elon Musk, the CEO of Tesla Inc and SpaceX, has weighed in on the dramatic price drop of older AI models, suggesting a potential market shift.

What Happened: On Monday, a user on X, formerly Twitter, asked Musk about the significant price drop of older AI models and its implications. The tech mogul responded by drawing a parallel between AI and other industries, indicating a potential market shift.



“AI will have a strong power law outcome, like search (Google, Bing, miscellaneous) & soda (Coke, Pepsi, miscellaneous),” he said.

Musk invoked a statistics principle called “Power Law,” suggesting that the AI market could be dominated by a few major players, replicating the outcome in other industries such as web search and soda.

The “Power Law” principle explains how certain phenomena are heavily skewed towards a few significant instances. One common example of a power law is the distribution of wealth. In many societies, a small percentage of the population holds the majority of the wealth, while the majority of people have much less.



However, it is important to note that as new tech enters the market, the old ones inadvertently get cheaper. This explains why GPT 3.5 model’s prices have been reduced after GPT-4’s launch.

Why It Matters: Last month, Musk’s AI startup, xAI, made its large language model, Grok, open source, allowing others to use the model for their purposes.

At the time, Musk’s decision to open source Grok was regarded as a strategic maneuver considering he has filed a lawsuit against ChatGPT-parent OpenAI, which he co-founded in 2015 and subsequently departed from in 2018.

Musk has been engaged in a public dispute with OpenAI over the company’s shift away from its non-profit goals, a move that has drawn criticism from fellow tech billionaire Vinod Khosla.

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