According to Flexport's CEO, large incumbents hold significant AI advantages over startups. They possess vast proprietary data for model training, the domain expertise to target high-value problems (features, not companies), and instant distribution, allowing them to deploy AI solutions to thousands of customers overnight.

The notion of building a business as a 'thin wrapper' around a foundational model like GPT is flawed. Truly defensible AI products, like Cursor, build numerous specific, fine-tuned models to deeply understand a user's domain. This creates a data and performance moat that a generic model cannot easily replicate, much like Salesforce was more than just a 'thin wrapper' on a database.

The key for enterprises isn't integrating general AI like ChatGPT but creating "proprietary intelligence." This involves fine-tuning smaller, custom models on their unique internal data and workflows, creating a competitive moat that off-the-shelf solutions cannot replicate.

Unlike mobile or internet shifts that created openings for startups, AI is an "accelerating technology." Large companies can integrate it quickly, closing the competitive window for new entrants much faster than in previous platform shifts. The moat is no longer product execution but customer insight.

Stripe’s payments model shows how AI creates powerful data flywheels. Their massive, proprietary transaction dataset trains superior models, which improves the product, attracts more customers, and widens their data advantage, making it nearly impossible for new competitors to catch up.

AI favors incumbents more than startups. While everyone builds on similar models, true network effects come from proprietary data and consumer distribution, both of which incumbents own. Startups are left with narrow problems, but high-quality incumbents are moving fast enough to capture these opportunities.

As AI makes building software features trivial, the sustainable competitive advantage shifts to data. A true data moat uses proprietary customer interaction data to train AI models, creating a feedback loop that continuously improves the product faster than competitors.

If a company and its competitor both ask a generic LLM for strategy, they'll get the same answer, erasing any edge. The only way to generate unique, defensible strategies is by building evolving models trained on a company's own private data.

As algorithms become more widespread, the key differentiator for leading AI labs is their exclusive access to vast, private data sets. XAI has Twitter, Google has YouTube, and OpenAI has user conversations, creating unique training advantages that are nearly impossible for others to replicate.