The Second Wave of AI: Beyond Cost Savings to New Experiences
For the past three years, artificial intelligence has largely been a tool for cost reduction. Now, a growing number of founders and investors are looking beyond efficiency gains, envisioning a future defined by entirely new products – apps, games, and services made possible by large language models. This shift is being called AI’s “Second Wave.”
“The first wave of AI made existing things cheaper. Automation. Efficiency,” says Kylan Gibbs, former Google DeepMind product manager and CEO of AI startup Inworld. “The next wave makes things that couldn’t exist before. New products. New experiences. New revenue. That’s the difference between optimizing spend and creating it.”
From Automation to Creation: A Fundamental Shift
Gibbs argues that if AI only trims costs, it simply redistributes value within existing businesses. True economic potential, he believes, is unlocked when AI enables entirely new consumer products that people are willing to pay for. “AI reaches its real economic potential when it creates value consumers seek to pay for, not just value businesses want to save,” he recently posted on LinkedIn.
This next phase, according to Gibbs, requires a “consumer-scale AI stack” capable of real-time responses (under 300 milliseconds), supporting millions of concurrent users, and delivering deeply personalized experiences.
Accelerating the Second Wave: New Startups and Investment
Gibbs is putting his vision into action with a new Silicon Valley accelerator designed to back up to 30 “Second Wave” AI startups. These companies will focus on building novel consumer experiences rather than simply adding chatbots to existing workflows. The accelerator has attracted investment from firms like Khosla Ventures and Lightspeed Venture Partners, as well as leaders from OpenAI, Google, and Stripe.
This philosophy aligns with a recent sentiment from Y Combinator CEO Garry Tan: “Instead of worrying about doing the same thing we’ve been doing for cheaper, why not focus on doing the thing we never even dreamed of doing?”
Particle: Reimagining News with AI
Particle, an AI-native news platform, exemplifies this new approach. CEO Sara Beykpour notes that the tech industry is at a pivotal moment. “We’re in a transition between the first wave and the second wave,” she says. The platform leverages AI to deliver news in innovative formats, such as embedding relevant clips from podcasts directly into articles. This allows users to quickly access key insights without having to listen to entire episodes.
AI embeddings are used to map relationships between transcripts and stories, and generative AI provides summaries and context. Beykpour highlights that recent advancements in AI embeddings have been crucial to this functionality.
Luvu: AI as a ‘Super-Motivator’ in Fitness
Luvu, an AI-powered fitness app launched in August 2025, is reinventing personal training. The app features an AI “marshmallow” that provides highly personalized notifications and real-time feedback. Instead of generic reminders, Luvu tailors messages based on user data, such as acknowledging a recent test and encouraging a workout afterward.
The app boasts significantly higher notification click rates and retention rates compared to traditional fitness apps. Luvu is also experimenting with reinforcement learning and computer vision to provide even more personalized guidance and feedback.
Status: Living Your Dream Life Online
Status, an AI-powered social simulation game, is creating immersive role-playing experiences. Users can embody any character they can imagine and interact with AI-generated characters in dynamic social media worlds. The app leverages large language models to create a unique and engaging experience that wasn’t possible before the advent of modern AI.
CEO Fai Nur emphasizes that Status couldn’t have existed without LLMs. The platform allows users to explore different identities and scenarios in a way that feels both realistic and imaginative.
The Future of AI: Value Creation and Consumer Delight
For Gibbs and others driving the Second Wave of AI, the focus is on creating value for consumers and delivering experiences that are both novel and delightful. This shift represents a fundamental change in how AI is perceived and utilized, moving beyond cost savings to unlock new possibilities and expand the economic pie. If the first wave made businesses leaner, the second wave promises to build everyday life richer, more interactive, and more personalized.
FAQ
What is the “Second Wave” of AI?
It refers to the shift from using AI primarily for cost reduction and automation to creating entirely new products and experiences that weren’t possible before.
What are the key requirements for a “consumer-scale AI stack”?
Real-time responses (under 300 milliseconds), support for millions of concurrent users, and deeply personalized experiences.
Who is Kylan Gibbs?
Kylan Gibbs is the CEO of Inworld, an AI startup, and a former product manager at Google DeepMind.
What role does Google play in the development of Inworld?
Inworld hosts its databases and builds its scalable runtime platform on Google Cloud, leveraging Gemini LLMs.
What is the significance of the new accelerator program?
It aims to support and fund startups focused on building innovative consumer experiences powered by AI.
