'Plenty of Room for Startups': This Is Where Entrepreneurs Should Look for Business Opportunities in AI, According to Microsoft's AI CEO Entrepreneurs may find their niche in a key area of AI intelligence: stopping hallucinations.

How should entrepreneurs think about new business opportunities in AI?

Microsoft AI CEO Mustafa Suleyman told LinkedIn co-founder Reid Hoffman on an October episode of the podcast Masters of Scale that startups can find a niche in fine-tuning AI models with accurate examples. Fine-tuning means revising the models with examples so they perform better with fewer hallucinations.

"You have to show [an AI model] tens of thousands of examples of good behavior, and you have to fine-tune those into the model," Suleyman said. "The good news is that tens of thousands of examples are very accessible to many niche domains or specific verticals. So that's an edge and I think there's plenty of room for startups in doing high-quality fine-tuning of a pre-trained model."

^{Microsoft AI CEO Mustafa Suleyman. Photographer: Stefan Wermuth/Bloomberg via Getty Images}

Small AI Models Are the Future

Small AI models will be the future of AI, according to Suleyman.

"We're going to sort of compress knowledge into smaller, cheaper models, which can live on a fridge magnet," he said.

Related: Microsoft Is on Track to Hit a Major Milestone, the 'Fastest Business in Our History,' According to Its CEO

Training a large AI model currently takes about $100 million, with more advanced models expected to cost billions of dollars. The data that goes into training these models is controversial though, with many copyright lawsuits pending against companies like OpenAI.

Is AI Training Ethical?

In June, Suleyman answered the question of whether AI companies have taken the world's intellectual property for their own gain. He stated then that almost all content on the Internet, except for news sites and publishers that have asked not to be crawled, is open to AI training.

"I think that with respect to content that is already on the open web, the social contract of that content since the '90s has been that it is fair use," he said at the time.

Related: Microsoft AI CEO Says Almost All Content on the Internet Is Fair Game for AI Training