Battle of the AIs: How Generative AI Impacts the Demand for Traditional AI Services

This research investigates the effects of emerging generative AI, represented by ChatGPT, on the demand for traditional non-generative AI services. While prior studies mainly focused on ChatGPT’s influence in online communities, such as content generation and idea crowdsourcing, and its role in labor markets assessing productivity and task performance, our study takes a distinct angle. We probe the direct financial ramifications stemming from ChatGPT’s introduction to the demand of non-generative AI services. By evaluating the revenue implications at an individual customer level, we provide a granular insight into generative AI’s economic footprint within the AI industry. Our findings are illuminating: after ChatGPT’s emergence, there was a significant decline in demand and revenue for non-generative AI services within our study’s scope. We further investigate the factors contributing to this decreased demand and examine if the performance of non-generative AI plays a mitigating role. Additionally, we discuss the prospective role of advanced generative AI iterations, like GPT-4, in accelerating this trend. Our study offers a panoramic view of the AI domain, contrasting the promise of generative models against the ongoing advancements in traditional discriminative ones. For AI service providers, we underscore a pivotal decision: embrace the novel realm of generative AI or bolster the established trajectory of non-generative frameworks.