Damo's latest opinion: The open source model is not a nightmare for software companies; this group of vendors who control the corporate context and pricing power will win

The Zhitong Finance App learned that the use of open weighted artificial intelligence (AI) models continues to rise. Morgan Stanley believes that companies such as CrowdStrike (CRWD.US), Datadog (DDOG.US), and Microsoft (MSFT.US) will follow the trend and eat this round of industry dividends.

In a report to clients, Morgan Stanley analysts wrote, “The prospects for adopting an open weighting model are not only that the model becomes cheaper, but also that the cost of producing effective intelligence capabilities is declining, and at the same time, the volume of calls for intelligent services is expected to rise dramatically.”

Analysts also said that the three companies mentioned above, as well as Atlassian (TEAM.US), Cloudflare (NET.US), MongoDB (MDB.US), Nutanix (NTNX.US), Palantir (PLTR.US), Palo Alto Networks (PANW.US), SAP (SAP.US), and ServiceNow (NOW.US) are “the biggest beneficiaries of the increase in the adoption rate of the open weighting model.”

Other companies that may benefit from the rise of an open weighting model include Box (BOX.US), CRM.US (CRM.US), Manhattan Associates (MANH.US), Shopify (SHOP.US), and Toast (TOST.US).

Analysts further dissected that the open weighting model (the bank judged that its cost was lower, but this view is still debated) has created “two very different opportunities” for existing software companies: on the one hand, broadening the boundaries of commercially viable workflows, and on the other hand, amplifying the value of the manufacturer's own assets.

The analyst explained, “The first type of opportunity can drive product adoption and usage, but competitors can also seize it. The second type of opportunity barrier is higher: the reduction in the cost of intelligence capabilities will significantly increase the value of assets such as enterprise business context, trusted data, telemetry data, secure execution environment, transaction processing and compliance control to customers. As long as such capabilities are difficult to replicate, even if delivery costs decrease, manufacturers are in a position to stabilize pricing, or even increase prices as the value obtained by customers increases. Therefore, the biggest winners need to also have broad commercialization space and pricing power, and be able to retain part of the cost dividend rather than transfer all of the profits through price cuts in fierce competition.”