AI Competition Shifts From Model to App Layer
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Today on the AI Daily Brief, why OpenAI's new hire shows how AI competition is moving to the app layer. Before that in the headlines, AI heads to a Washington hearing and it's all about acceleration. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI. Thanks to today's sponsors, KPMG, Blitzy, and Super Intelligent. And to get an ad-free version of the show, go to patreon.com slash AI Daily Brief.

Welcome back to the AI Daily Brief Headlines Edition, all the daily AI news you need in around five minutes. AI leaders headed to Washington last week to urge lawmakers to change tack on AI regulation. On Friday, Sam Altman testified alongside Microsoft President Brad Smith, AMD CEO Lisa Su, and CoreWeave CEO Michael Entrader before the Senate Committee on Commerce, Science, and Transportation.

Now, the tenor of this conversation was very different than some of the hearings we had back in 2023. The big theme was absolutely acceleration, with AI leaders asking for fast tracks for data center construction, power plant deployment, and even training of electricians. Sam Altman said, I believe the next decade will be about abundant intelligence and abundant energy.

Making sure that America leads in both of those, that we are able to usher in these dual revolutions that will change the world we live in in incredibly positive ways, is critical. And indeed, as you might imagine, competition with China loomed large in the hearing, with the AI leaders encouraging a shift in viewpoint.

NVIDIA CEO Jensen Huang recently said the world of AI fundamentally changed this year due to Chinese technology catching up quickly. Microsoft's Brad Smith reinforced this view, stating that the U.S. needs to continue innovating because AI is, quote, a race that no company or country can win by itself.

He encouraged the government to focus on infrastructure rather than regulation, stating, innovation will go faster with more infrastructure, faster permitting, and more electricians. Altman commented, as AI systems become more capable, people will want to use them even more, meaning that demand requires more chips, training data, energy, and supercomputers. Infrastructure is destiny, and we need a lot more of it.

AMD's Su emphasized that the US must lead at every layer of the AI stack. In a somewhat pointed reference to NVIDIA's proprietary CUDA ecosystem, she said, "...I think open ecosystems are really a cornerstone of US leadership, and that allows ideas to come from everywhere and every part of the innovation sector. It's reducing barriers to entry and strengthening security as well as creating a competitive marketplace for ideas."

The main point of the hearing was to discuss what should come next after the Trump administration declined to enforce the Biden-era diffusion rule, which would have ramped up export controls on chips. Republicans made it clear that the administration would prefer a market-driven response rather than regulating AI. However, there was tension in the isolationist style of the administration set against the need to attract top talent and spread US-made AI throughout the globe.

Smith said, "...we need faster adoption, what people refer to as AI diffusion, the ability to put AI to work across every part of the American economy to boost productivity, to boost economic growth, to enable people to innovate in their work. If America is going to lead the world, we need to connect with the world. Our global leadership relies on our ability to serve the world with the right approach and on our ability to sustain the trust of the rest of the world." He argued that the Biden diffusion rule had, quote, "...sent a message to 120 nations that they couldn't count on us to provide the AI they want and need."

Many noted just how different the tenor of the conversation had been between 2023 and 2025. Tom Simonite from the Washington Post said that in 2023, Sam Altman had told Congress that a new agency should be created to require licenses for powerful AI models, while 2025, Sam Altman told Congress that requiring licenses for powerful AI models would be, quote, disastrous.

Then again, commenter Joe Bakhti noted that we now have a case study to inform his view, writing one big recurring theme, how do we make sure the failures that have destroyed European tech are not repeated here? Now, speaking of AI and geopolitics, the U.S. Treasury is reviewing Benchmark's investment into the company behind the Manus agent.

You might remember that late last month, Bloomberg reported that Benchmark Ventures had led a $75 million fundraising round that valued the company butterfly effect at $500 million. The news was weird to many at the time, with a prominent American venture firm appearing on the cap table alongside Tencent as AI Cold War tensions grew. Under a Biden-era executive order that came into force this year, firms are required to report to the Treasury on investments in key areas such as AI that could, quote,

accelerate and increase the success of the development of sensitive technologies. Semaphore reports that Benchmark's lawyers believed that the investment wouldn't come under scrutiny and the firm declined to report. The logic was reportedly that the startup wasn't developing foundation models, but rather a so-called wrapper for other models. The argument being that an agentic wrapper doesn't meaningfully advance AI capabilities in China. The lawyers also concluded the company wasn't technically Chinese by virtue of being incorporated in the Cayman Islands and

and having employees in the US, Singapore, Japan, and China. Other investors were not buying it. Josh Wolf of Lux Capital said that the investment makes zero sense. And Delian Asparava, founder's fund, wrote, I'm not saying benchmark partners are Chinese assets, but they are definitely assets to China.

Turns out that careful corporate structure didn't dissuade the Treasury from taking a closer look. Sources say that Benchmark is likely to echo their legal advice and claim they had no duty to report the investment. Semaphore wrote, Benchmark may have a legitimate argument for why it's Manus' investment in the U.S. interest. $75 million isn't enough to do much in AI research these days, but it should still be vetted for possible national security implications. The fact that the firm chose not to initially notify the Treasury Department of its investment in Manus suggests there's something wrong with the process.

Now, why this is worth paying attention to outside of the specifics of the investment is that this could become a proxy for how the administration is going to treat the flow of capital into Chinese startups, even if their mailing address is technically in the Caymans.

Lastly today, the new Pope apparently chose his name in reference to the challenges of the AI revolution and the era that it represents. On Thursday of last week, the white smoke billowing out of St. Peter's Basilica signaled that a new pontiff had been selected. His papal name, Leo XIV, was widely suspected to be a reference to the last Pope going by that name, who led the Catholic faith during the late 1800s.

Pope Leo confirmed the reference, seeing the parallels between that time of upheaval and the challenges of the current moment. He said, "...I chose to take the name Leo XIV. There are different reasons for this, but mainly because Pope Leo XIII addressed the social question in the context of the first great industrial revolution. In our own day, the Church offers to everyone the treasury of her social teachings in response to another industrial revolution and to developments in the field of artificial intelligence that pose new challenges for the defense of human dignity, justice, and labor."

Cardinal Chomaly commented, he told me he is very concerned about the cultural shifts we are living through. A Copernican revolution, really. Artificial intelligence, robotics, human relationships. He was inspired by Leo XIII, who in the midst of the Industrial Revolution wrote Rerum Novarum, launching an important dialogue between the church and the modern world.

Now, it is definitely the case that the Catholic Church has paid close attention to the development of AI over the past few years, both in harnessing the technology to transcribe the Vatican's archives, as well as facilitating conversations about the ethical implications of the tech. What's clear is that by referencing the Pope of the Industrial Revolution, Leo XIV is signaling his intention to be involved in the discussion as AI reshapes society.

Leo XIII criticized both militant socialism and laissez-faire capitalism, avoiding the extremes of the political moment of the late 1800s and instead advocating for a human-centric view. He promoted both trade unions as a protection for the worker, alongside the right to property and free enterprise as fundamental elements of human dignity. Gary Marcus writes, "'The Pope gets it. The most important question about AI isn't a technical question. The most important question is about how to maintain and grow a just society in the age of AI.'"

That, however, is going to do it for today's AI Daily Brief Headlines Edition. Next up, the main episode. Today's episode is brought to you by KPMG. In today's fiercely competitive market, unlocking AI's potential could help give you a competitive edge, foster growth, and drive new value. But here's the key. You don't need an AI strategy. You need to embed AI into your overall business strategy to truly power it up.

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Welcome back to the AI Daily Brief. Today, we're talking about news that nominally is about leadership at OpenAI, but actually, I think, is much more telling as an indicator of the state of play when it comes to competition among the big foundation model companies. The TLDR is that I think increasingly companies realize that everything is going to be about surface area with customers and how much they own the customer relationship.

that underlying technology is very, very likely to be commoditized. And what will matter is the productization of those commoditized technologies, including the integration into people's existing workflows, the specific vertical or industrial knowledge or context that makes particular product decisions work better for certain types of audiences, and just in general customer devotion.

This harkens to some of the themes that we've been playing out and exploring in the context of consultants recently as well, where we're all just trying to figure out what the implications are in a world where the underlying technology is commoditized, and a lot of it comes back to real human relationships. So keep that context and background in mind as we go through this news. Now, like I said, the specific event that triggered the most recent version of this conversation was that Instacart CEO Fiji Simo has been hired as OpenAI's CEO of Applications.

And while this is a new title, it's definitely a significant one.

This is the first division CEO title that OpenAI has added, although this is a fairly common practice among the tech giants. Sam Altman will continue to head the company, overseeing verticals like research, compute, and applications, with CIMO reporting directly to him. Altman wrote in a blog post, "'Applications' brings together a group of existing businesses and operational teams responsible for how our research reaches and benefits the world, and Fiji is uniquely qualified to lead this group."

Serving as an OpenAI board member over the past year, Fiji has already contributed a great deal to our company. So who is this person? Well, as I mentioned, her most recent tenure has been at Instacart. She was brought into the company as a board member in early 2021, and by the end of that year, she had replaced the company's founder as CEO. Her primary goal was preparing and shepherding the company towards a successful IPO in 2023.

Prior to that, Simo spent a decade at Meta. She led the launch of ads on the newsfeed, monetization of the Facebook app, and oversaw product development for Facebook Video. When she exited the company, she was head of the Facebook app. In a statement, Simo wrote, "'Joining OpenAI at this critical moment is an incredible privilege and responsibility. This organization has the potential of accelerating human potential at a pace never seen before, and I'm deeply committed to shaping these applications towards the public good.'" Alongside the blog post, Altman's post on X gave a little bit more color.

He wrote, Basically, it sounds like Altman is handing over reins to the most important commercial parts of the company.

The internal reports from OpenAI team members couldn't be any more glowing. CMO Kate Roush wrote, She's all signal, no noise, highest integrity leader I know. Very good news for OpenAI, for all of us. Roush is another meta-veteran, by the way, leading brand and product marketing across the company's ecosystem until 2021 when she moved over to Coinbase. Adding more context in his blog post, Alban points out that OpenAI is actually multiple companies at the same time. He said, We started OpenAI as a research lab with a mission to ensure AGI benefits everyone.

Over the past two and a half years, we've started doing two additional big things. First, we've become a global product company serving hundreds of millions of users worldwide and growing very quickly. More recently, we've also become an infrastructure company building the systems that help us advance our research and deliver AI tools at unprecedented scale. Bloomberg sources also suggest that this is coming with a larger structural shakeup as well, with COO Brad Lightcap, CFO Sarah Fryer, and Chief Product Officer Kevin Wheel now reporting into CIMO.

Now, beyond the news, a lot of the coverage has focused on speculation around what this means for the industry. For example, The Information published a piece called AI Firms Get Religion on Marketing. They write, artificial intelligence scientists and researchers make room. You're about to get an influx of new colleagues from the world of advertising and marketing as the headlong race for AI dominance moves into a new, more commercial phase. As examples, they point to ex-Meta ad executive Mark Darcy heading over to Microsoft to help market Copilot and, of course, this update from OpenAI.

They speculate that in addition to growing the product and its current lines of revenue, that CIMO might also be in charge of bringing ads into the ChatGPT experience. FleetingBits writes, OpenAI hiring Fiji CIMO is an ominous sign. Ads incoming. She built Instacart ads. She was in charge of the advertising business and monetizing mobile at Facebook. Before that, she built out advertising at eBay. Now, that might be the case, but it's certainly not the only possibility. OpenAI also has an accelerating enterprise business.

Now, of course, the ChachiBT consumer story is phenomenal. Albin recently claimed that the company was up to 800 million weekly active users, and in any case seems well on its way to be the fastest ever to hit a billion users, easily outpacing TikTok and Facebook Messenger.

When it comes to enterprise, new data from payments company Ramp shows that business adoption of OpenAI's product has skyrocketed this year. Ramp found that 32% of the businesses they serve are paying for OpenAI subscriptions as of April. That's up from 19% in January and 28% in March, so a big, big jump.

Ramp economist Ari Karzian wrote, OpenAI continues to add customers faster than any other business on Ramp's platform. Our recently launched Ramp AI Index shows business adoption of OpenAI growing faster than competitor model companies. So again, this could be another part of what CMO is in charge of.

There's definitely a sense, no matter what, that this is about practice. Spuddish AF writes, OpenAI doesn't need more geniuses, it needs doers. Fiji Simo is a shipper, not a researcher. This hire screams, we've won the lab, now we fight in the marketplace.

But as I said at the beginning, I think it's even beyond that. There has been so much conversation recently around the commoditization of underlying models. This is something that I think many of us have experienced. When it comes to which model we use at any given time, it tends to be more about the vagaries of the particular use case than about any sort of affiliation to one company or another. Things are constantly shifting and changing, and it sort of behooves one to be a model omnivore.

So if models themselves become commoditized, companies are going to have to find different moats. Building better products and owning the application layer is one way of doing that. And I think that, more than anything, is what this story is actually about. So yes, I think that all of these reports saying that this represents a shift in the era of AI competition are correct, but it is more fundamental than just business competition. It's reflective, I think, of an entire shift in our structure of understanding how the business battle is going to play out.

Whatever the case, it certainly appears that OpenAI is not content to sit on whatever lead it currently has and is going to fight very hard, not just for model dominance, but for product dominance as well. For now, that is going to do it for today's AI Daily Brief. Appreciate you listening or watching as always. And until next time, peace.