What ChatGPTs iPhone Moment Looks Like

Now that chatbotsfrom OpenAI and Microsoft have demonstrated generative A.I.s value, companies are running tobuild on their APIs. Soon youll be able to generate recipes within ChatGPT and have itadd the ingredients to Instacart. Or have it find restaurant reservations with help fromOpenTable. Or discover flightswith Kayak. Some companies, including Morgan Stanley, are alreadybuilding standalone toolsfor staff and customers using A.I. tech like GPT-4.
This type of eager and widespread developer adoption was always the goal for the A.I. platforms, but something funny happened along the way. The consumer tools they built to show their capabilitieslike ChatGPT and Bing Chatgarnered so much interest theyve become destinations themselves. And as their A.I. gets better, it may well end up subsuming some of the products and features developers are building with the technology today.

There are plenty of companies that can benefit in the short term. But long term, the entire value proposition of the company could just go entirely away, Rishi Jaluria, managing director of software equity research at RBC Capital Markets, told me.
The seemingly straightforward relationship between A.I. tech providers and A.I. tech developers grew somewhat complicated last month when OpenAI positioned ChatGPT as a platform itself, not just a demo. With anew feature called Plugins, OpenAI began allowing developers to build directly into ChatGPT, not just on top of the underlying technology,so people chatting with the bot could interact with their services. Some saw Plugins as ChatGPTs iPhone moment, meaning the bot was the operating system, and the pluginsincludingfrom Instacart, OpenTable, and Kayakwere the apps.
In the short and medium term, theres plenty of opportunity for all involved. OpenAI stands to benefit from companies building standalone apps on top of its GPT-4 technology. It will also benefit when they build their offerings into ChatGPT. Developers, meanwhile, can use OpenAIs tech to create new applications, become more efficient, reach ChatGPTs100 million-plus users, and bask in the shine of developing on the cutting edge. I believe we will have an entire generation of startups built on OpenAI, just like we had a trillion-dollar economy created on AWS, and a trillion-dollar economy built on the iPhone, said Jaluria.

But in the long term, things could get complicated. Unlike typical operating systems, ChatGPT occupies the same user interface as the apps within it. Its growing smarter as time goes by, and its still nowhere near OpenAIs goal to create A.I. on par with human intelligence. So as companies build on it, the underlying A.I. may grow capable of replicating their capabilities, potentially rendering them obsolete.

A task-management app, for instance, might see its relevance decline as ChatGPT remembers more about users and potentially learns to prompt them about upcoming deadlines. Financial apps could fall away as A.I. learns to ingest and interpret data. And even OpenAIs partners like Kayak might become unnecessary if the A.I. learns to navigate travel sites and find similar deals. Kayak did not respond to a request for comment.
OpenAI is just an example here, and similar issues could emerge with Microsofts Bing Chat and Alphabets Bard, perhaps even sooner. Software is characterized bycoopetition, said Jaluria. Thats how its always been. Look no further than Microsoft, right? Microsoft is an important partner but also a competitor to a lot of companies out there.
A.I. still isnt able to accomplish many of these tasks on its own, but even the possibility is making some investors think twice about where theyll bet. Its hard to tell whats exactly investable except for a couple of key categories, said investor Joe Marchese. The tension will likely remain as developers consider what to build on this promising but fraught new technology. Maybe their products can use ChatGPT to help you buy lunch. Or maybe ChatGPT will eattheirs.