Value within the artificial intelligence industry is slowly shifting, from the companies developing models to the apps building on top of them.
Early in the AI race, critics viewed apps like Perplexity, Replit, Sesame and Abridge as second-rate middlemen, slapping an interface on someone else’s technology. They were disparagingly known as AI wrappers: companies with entire apps or businesses wrapped around existing models. Companies like OpenAI, Google, Meta and Anthropic developed their own models.
The arrival of ultra-efficient models and increasing model commoditization accelerated the shift.
“There was an impression that the only way to compete in AI would be to raise hundreds of millions of dollars to pre-train these web-scale models that could solve every problem underneath the sun, and that was the only game in town for AI,” said Shiv Rao, founder and CEO of the healthcare AI startup Abridge. “Very quickly, people figured out that actually, value moves up the stack.”
Megacaps like Microsoft poured billions into the first stage of the AI arms race, focusing on the infrastructure and model layer. But models are now increasingly looking commoditized, narrowing the advantage that any model-builder had. While they focused on delivering raw capability and intelligence, app companies looked at real-world uses and solutions.
“[Wrapper] just sort of means that it feels less thoughtful. It feels like you’re giving this little package around what was built. As opposed to what it really means is, ‘I’m going to understand the customer’s problem,’ ” said Andreessen Horowitz partner Bryan Kim. “I’m going to marry this and deliver a solution to what you’re trying to achieve.”
Wrappers have even changed the way Silicon Valley builds, ushering in the era of vibe-coding. With an app like Cursor, one of the fastest-growing startups ever, anyone can develop an app without a degree or years of coding expertise.
“I love the phrase vibe-coding because, actually, I think it points to … this new way that we’re going to interact with these systems where we’re not necessarily going to interrogate all of what they do in process,” said E14 Fund Managing Partner Calvin Chin. “Over time as the models improve and these products built on top of them improve, we’re going to get other kinds of vibe-activities in the economy. So maybe it’s vibe-lawyering, vibe-accounting, and we’re going to trust the models more and more.”
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