Venture capitalist Chamath Palihapitiya declared that the generative AI race will ultimately be won by established tech incumbents, not new startups, citing their “massive distribution” as the decisive factor.
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Incumbents Capturing OpenAI’s Market Share?
In a recent analysis posted on X, Palihapitiya broke down new market data, concluding that Alphabet Inc.‘s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Gemini “has a huge runway ahead of itself as their models and services become better.”
His argument centers on a “Generative AI Traffic Share” chart from Similarweb, which he labels “Chart 1: Distribution Matters.” The data shows that while OpenAI is “still the clear leader,” its commanding percentage share has been steadily eroding over the last 12 months as the overall market grows.
Palihapitiya finds it “curious who they are losing share to.” He points out that the beneficiaries are not “other startups but incumbents.” Google’s Gemini visibly demonstrates this trend.
Google’s Gemini Increases Its Market Share Over 12 Months
In the chart, Gemini’s traffic share (represented by a red bar) has expanded from a razor-thin slice 12 months ago to a much more significant portion of the market today.
This growth supports Palihapitiya’s thesis that Google is successfully leveraging its existing ecosystem—from search to Android—to push its AI models to billions of users, a distribution network startups cannot match.
Meta Is Also Poised To Surge Because Of Its Massive Reach
This distribution advantage isn’t limited to Google. Palihapitiya identified Meta Platforms Inc. (NASDAQ:META) as another incumbent poised to surge.
He stated that “when/if Meta gets their act together, they will be able to gain share quickly” by integrating their AI models across their massive social media platforms.
This analysis suggests that while startups like OpenAI created the category, the long-term battle will be fought over distribution channels. Palihapitiya concluded it “likely means that xAI will need to license Grok aggressively OR acquire existing distribution for their models” to remain viable against the entrenched tech giants.
Alphabet’s 33% YTD Gain: A Testament Of Its Dominance?
Alphabet’s Class shares ended 0.76% higher at $253.79 per share on Friday. The stock has gained 33.13% year-to-date and 53.07% over the year.
As per Benzinga Pro, GOOG’s market capitalization stood at $3.08 trillion, whereas META enjoyed a m-cap of $1.80 trillion.
Benzinga Edge Stock Rankings show that GOOG maintains a strong price trend over the short, medium, and long terms, with robust growth and quality scores. Additional information is available here.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
