As of March 28, 2025, a significant transformation is underway within the artificial intelligence (AI) industry. The locus of value, once firmly anchored in the hands of companies developing foundational AI models, is steadily shifting toward the applications built atop these technologies.
Enterprises such as Perplexity, Replit, Sesame, and Abridge—previously dismissed as mere “AI wrappers” for leveraging existing models—are now emerging as pivotal players, redefining where true worth resides in the AI ecosystem. This shift, driven by the commoditization of models and the rise of efficient solutions, merits a closer examination.
In the nascent stages of the AI surge, the prevailing sentiment held that dominance required substantial investment—hundreds of millions of dollars—into pre-training expansive, web-scale models capable of addressing a broad spectrum of challenges. “That was perceived as the sole path to success in AI,” reflects Shiv Rao, founder and CEO of Abridge, a healthcare-focused AI startup.
However, this perspective has rapidly evolved. The advent of highly efficient models, such as DeepSeek’s R1 (as detailed in a prior post), coupled with increasing model commoditization, has diminished the unique advantage once held by model developers like OpenAI, Google, Meta, and Anthropic.
While industry giants such as Microsoft committed billions to constructing the infrastructure and foundational layers of AI, their focus on raw computational capability has been overtaken by a new priority: practical utility.
Application-driven companies have redirected their efforts toward solving tangible, real-world problems. “The term ‘wrapper’ suggests a lack of depth,” notes Bryan Kim, a partner at Andreessen Horowitz. “In reality, it’s about deeply understanding customer needs and delivering tailored solutions.” These firms are not merely repackaging technology; they are enhancing its relevance and accessibility.
This transition is also reshaping the operational dynamics of Silicon Valley. Consider Cursor, a startup experiencing unprecedented growth by enabling individuals to develop applications through an intuitive interface, regardless of formal coding credentials.
This phenomenon, termed “vibe-coding” by Calvin Chin, Managing Partner at E14 Fund, represents a paradigm shift in interaction with AI systems. “We’re moving away from exhaustive scrutiny of processes,” Chin explains. “As models advance, we may see ‘vibe-lawyering’ or ‘vibe-accounting,’ where trust in AI facilitates broader economic activities.”
The momentum is palpable across industry discourse. Commentary on platforms like X highlights this evolution, with posts noting “values moving up the stack” and praising innovations like Cursor’s democratization of coding.
While model developers such as OpenAI, with its pursuit of a $340 billion valuation (as previously reported), retain significant influence, their once-exclusive edge is eroding. The true catalysts of progress now lie in applications that transform AI into practical tools for everyday use.
This shift prompts critical questions about the future trajectory of AI. Will the rise of application-centric innovation, exemplified by “vibe-coding,” sustain its momentum, or is it a transient trend?
The evidence suggests a lasting impact, as these applications bridge the gap between technological potential and user needs. Your insights on this evolving landscape are welcome—please share your perspectives below.
