Why Fine Tuning Models Will Become the Next Gold Rush After GPU's; Scale AI's Success in RLHF

Scale AI, Labelbox, Snorkel AI, Landing AI, Cleanlab, ClarifAI Accenture, Apen, Lionbridge, Super Annotate, AWS - Mechanical Turk, Surge AI

Last year, our clients were very interested in how AI affects data center and server technologies. But now, we're talking more about how businesses can use generative AI to create value. We're also getting specific questions about companies that offer data fine-tuning services.

As our clients try to understand generative AI better, they're learning about the details of fine-tuning. This process is like turning raw material into gold—it turns general AI capabilities into solutions tailored to each business's specific challenges. Fine-tuning generative AI models involves creating high-quality data for supervised learning and reinforcement learning based on human feedback.

We think this area could grow into an $80 billion market by 2030, similar to the rise of the smartphone app industry. We have reports of unconstrained demand for high quality and proprietary fine tuning data.

Just like mobile apps became essential for businesses to interact with customers, we believe fine-tuning will be key for companies to stand out and deliver value to their customers and themselves in the future. If you wonder, how much businesses are spending on AI. A survey by Deloitte found that 53% of companies spend over $20 million annually on AI and machine learning. This data is even outdated as we write.

Fine-tuning using the Reinforcement Learning with Human Feedback (RLHF) technique relies heavily on human input and guidance to shape the model's behavior and align it with desired objectives.

As Andrew Ng, founder and CEO of Landing AI, states, "It's not just about having more data, it's about having the right data and the right people to interpret it"

In this article, we will review:

1. Why & What is Fine Tuning?

   1. Training a LLM - Pre Training, SFT, RLHF

   2. Rate of model performance improvement and what does this imply for the fine tuning industry

2. Key players in the fine tuning industry

   1. Differentiators and challenges in this business

   2. Why Scale AI is uniquely positioned?

3. Why Proprietary data is not enough to unlock the business value

Please note: The insights presented in this article are derived from confidential consultations our team has conducted with clients across private equity, hedge funds, startups, and investment banks, facilitated through specialized expert networks. Due to our agreements with these networks, we cannot reveal specific names from these discussions. Therefore, we offer a summarized version of these insights, ensuring valuable content while upholding our confidentiality commitments.