SAP’s CFO says artificial intelligence is becoming a winner-takes-all game – and BlackRock bond guru agrees

The AI ​​arms race is gaining momentum, which could be bad news for many smaller companies. In a recent interview with FortuneDominik Asam, CFO of German software giant SAP, described how the data advantage of larger companies can create a landscape of haves and have-nots.

“In some segments it’s a bit winner-takes-all,” he said. “You have a certain advantage; you can then develop faster; you can invest more than smaller competitors.”

According to Asam, the advantage of larger companies largely comes down to their ability to train artificial intelligence models to perform real-world tasks.

“In a winner-take-all game, it’s usually the case that if you want to train models, you need huge (amounts of) data, and that’s expensive. So it’s a match in which the one with the best data has the advantage,” he explained, adding that “from the training perspective, it’s clear that the winner takes all. The big guys can just produce bulkier models.

Asam also described how larger companies can more easily enable integration across industries and invest more in security when implementing new AI services. When it comes to investing in talent, the size and purchasing power of Fortune 500 companies give them another advantage. This is crucial in the face of what Tesla CEO Elon Musk calls “the craziest talent war” he has ever seen.

Beyond large-cap CFOs, Wall Street also predicts a winner-take-all environment in the AI ​​arms race, with Fortune 500 giants spending billions on the technology, lured by its productivity-boosting capabilities.

Rick Rieder, director of global fixed income and head of the global allocation team at BlackRock, says large companies with the most and best data now have what the investing world calls a “moat.” (Berkshire Hathaway’s Warren Buffett has long used the metaphor of a moat surrounding a castle to describe sustainable competitive advantage.)

“You see the moat widening for companies that are close to data or can help create it. So I think it makes a huge difference,” said the veteran investor, who oversees about $2.4 trillion in assets and is known as BlackRock’s bond guru. Fortune in a recent interview. “Companies that own the data or help process it will win.”

So what should smaller AI-focused companies do? Double down and spend more to compete with data-rich industry leaders, or find a new path?

Asam noted that larger companies likely won’t have every advantage in the AI ​​arms race, especially when it comes to base models – large-scale, generic language models that are ultimately trained for more specific use cases. The CFO described how SAP tested dozens of entry-level models for smaller companies that showed promising results.

“It’s really surprising how quickly new market participants appear and find good solutions there,” he said.

Thank you for reading, see you next time.

Daniel’s villa
[email protected]

Leaderboard

Jim McKinney has been named chief financial officer of SiriusPoint Ltd. (NYSE: SPNT), a global specialty insurance and reinsurance company, effective June 3. McKinney most recently served as vice president and chief financial officer of Kemper Corporation. Previously, he was vice president and chief financial officer of Banc of California.

Butch Oorlog promoted to chief financial officer at Raymond James Financial, Inc. (NYSE: RJF). Oorlog, currently chief accounting officer, will succeed Paul Shoukry, who has been named the company’s successor CEO.

Great thing

Generative AI can boost workplace productivity by helping U.S. workers save millions of hours a week on repetitive tasks, according to a new report from education company Pearson. Using its AI-powered workforce planning modeling, Pearson identified the top 10 job tasks in five countries (Australia, Brazil, India, US and UK) where the most time could be reclaimed through the use of generative AI.

For example, in the US, the top three job tasks that will save the most hours by 2026 thanks to generational AI are:

— Maintaining health or medical records (3,568,000 hours per week)

—Maintaining current knowledge in a given field (3,132,000 hours)

—Developing educational programs, plans or procedures (2,946,000 hours)

Going deeper

“I have worked with thousands of emerging Generation Z leaders. There is a fundamental shift in this generation’s career expectations” – this is new Fortune opinion of Ian Sandler, chief operating officer of global software investor Insight Partners.

Sandler writes: “Generation Z is entering the workforce for the first time and brings a unique perspective on careers and how they define success. There is a reset in terms of what they want to get out of work and what they are looking for in their career. While salary has traditionally been the most important factor in job decisions, Gen Z values ​​it less than any other generation and prioritizes joining an organization that aligns with their values, where they can find community and that determines how they advance in their careers will influence to be supported.”

He is also the founder of Riley’s Way, a foundation that provides leadership training and funding to young founders of social impact organizations.

Overheard

“When the paradigm shifts, do you have something to contribute? Because you have no God-given right to exist if you don’t have anything essential.

– said Microsoft CEO Satya Nadella FortuneJeremy Kahn in an interview.

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