Goodwater Capital co-founder Chi-Hua Chien expects consumer applications, rather than companies selling AI models and infrastructure, to capture most of the long-term value created by artificial intelligence. He also believes lower model costs, stronger personalization, and faster on-device AI will shape the next generation of consumer products.
Chien has spent more than two decades investing in consumer technology and was among the first investors to identify Facebook while working at Accel. Goodwater’s portfolio now includes companies across healthcare, finance, entertainment, and live events, such as Midi Health, Fever, and Monzo.
AI Infrastructure Faces Price Competition
Chien said earlier technology cycles showed that applications created more market value than the infrastructure supporting them. During the web era, he estimated that new infrastructure companies generated $400 billion in market value, compared with $3.1 trillion from applications.
He said the mobile era followed a similar pattern. Infrastructure companies generated about $700 billion, while applications including Netflix, Spotify, Meta, Uber, and Airbnb produced approximately $3.7 trillion.
Signs of model commoditization are already appearing through subscription price competition. Google recently reduced its Google AI Plus subscription from $7.99 to $4.99 per month while doubling its included storage from 200GB to 400GB.
Chien said companies with their own infrastructure and distribution can bundle AI services and reduce prices for consumers. This could make it harder for businesses that rely mainly on selling access to models to maintain their current pricing.
Personalization Could Drive Consumer Adoption
Chien expects AI to create value by processing large amounts of information and personalizing products for individual users. He said effective personalization can increase customer satisfaction, engagement, and average revenue per user.
Several Goodwater-backed entertainment companies use AI to customize experiences without presenting themselves primarily as AI businesses. Chien said some are reaching between $100 million and $600 million in annual recurring revenue while customers view them as entertainment products.
He also pointed to women’s healthcare provider Midi Health, which uses AI to help medical professionals serve more patients. The technology can increase access in areas where limited numbers of trained specialists have restricted the supply of care.
AI models running locally on smartphones are also improving quickly. Chien estimated that mobile models currently trail leading cloud models by about six months, compared with 18 to 24 months two years ago, and expects that gap to fall to around three months within a year.
Financial Services and Social Platforms May Remain Separate
Chien is less convinced that US consumers will accept one application combining social media, entertainment, and financial services. He said users expect security and reliability from financial products, while they approach social platforms with different expectations.
He also expects demand for physical experiences to increase as digital content becomes more abundant. Goodwater has invested in companies such as Fever and Bump, which use digital products to help people discover events and connect in person.
Featured image credits: rawpixel.com
For more stories like it, click the +Follow button at the top of this page to follow us.