France's Mistral Built a $14B AI Empire by Not Being American

> We have a few more picky customers in Germany.

Describe making business in Europe with one evergreen sentence

> For a lot of business customers, EU based hosting is not optional

They still use US clouds that can have information pulled by the US government.

I use their API for several models, both for personal and professional use. I think their approach (smaller, specialised models that are well-adapted for specific tasks) is a very good fit for how I work. And even the more general-purpose ones, like the chat model, just... refreshingly good in a lot of ways. My "ruthless review" prompt, which I use for, well, ruthless, guided reviews of early technical drafts, has good technical results for early reviews and holy crap is it ruthless and does it know how to swear. By the time Claude or ChatGPT are done being honest about how right I am to push back and gently circling back, Mistral's large model has sent me back to the drawing board twice.

Being in the EU does smooth a lot of things in terms of compliance, payment processing and whatnot, but I also like that their data retention and privacy policies are pretty clearly spelled out. I need to know something, there's a good chance it's explained outright somewhere and I don't need to read between the EULA lines and wonder what it means.

I do hit limits in terms of capabilities sometimes, and I'm sure other providers' services offer better results for some things. But the businesses ran on top of those more capable models feel too much like a scam at this point and I'd rather not depend on them for anything I actually need.

There is also risk from a US regulatory side as recent drama around antrophic showed.

Don’t think it’s inconceivable that the clowns in power decide to limit api access out of the blue one day because someone whispered a conspiracy theory in someone’s ear. API blockade…

See also the constant flip flopping on what cards NVIDIA can export - no consistency in stance or coherent policy

> $14B in AI terms is like 'second-best VSCode fork' tier money

Yep, and the comparison relies on key people believing the valuations.

Lots of mature companies will want their providers to be reasonably sheltered from the fallout of a coming US AI bubble burst.

> Edit: I hear the commenters to this post. However, Mistral still relies on American chips. If there is truly a divorce between Europe and the US such that relying OpenAI or Anthropic is not an option, neither will relying on Nvidia and likely the thousands of smaller hardware and software suppliers that make Mistral work. That's why I don't think it's realistic to say that Europeans can't rely on OpenAI/Anthropic and that Mistral is free from American reliance. If you want true independence, you have to rebuild every single layer like what China is doing. That's hard and expensive.

American designed. The GPUs are made in Taiwan, the RAM in South Korea, using machines from the Netherlands' ASML.

True independence is indeed hard and expensive. But it's also not the job of Mistral to tackle all the layers at the same time, not even the state-owned corporations of western Europe in the 20th century (and the EU isn't (yet) even a state) tried to tackle every stage of an industrial process by themselves.

Particularly if you’re in a regulated industry, “not American” and “not Chinese” _do_ provide value; they reduce risk.

In particular, the framework under which European companies can transfer data to US companies at all is beyond fragile.

> If there is truly a divorce between Europe and the US such that relying OpenAI or Anthropic is not an option, neither will relying on Nvidia and likely the thousands of smaller hardware and software suppliers that make Mistral work.

Well, you're pointing out a dissonance in a common AI (stock) booster argument: What if the hardware has lasting power?

If it does, then a company like Mistral can buy their capacity once from Nvidia (as in, once for each unit of capacity), then use it for a sustainable amount of time. No one forces them to scale beyond what's useful to the company and a mature user base. Provider dependence fades over time. That's a problem with Nvidia's current valuation.

If hardware doesn't last over that time, then the amount of cash invested in data center hardware can't really be reconciled with the expected revenue of running them at scale, and these projects are bound to run at a deficit over too long for them to be sustainable. That's a problem with Nvidia's valuation.

With independence as a target, Mistral can pretty safely bet on the former scenario, and then prepare for a future with either a mature market of diversified hardware providers, or innovations in quality and capacity for hardware they already have.

Recent political events have demonstrated that "Not American" is a very valuable strategic attribute.

Unless/until there is a risk that the chips themselves are backdoored and trying to exfiltrate data, European companies that host in Europe still solve a big problem for use of certain data in Europe.

It's not a purity test. Relying on US chips in not the same deal-breaker for all but the most extreme situation as relying on a poorly regulated US company to run the inference.

Businesses are risk averse and in the current environment they are all looking to secure their supply chains, whether to reduce their dependence on silicon from Taiwan, oil from the strait of Hormuz, or digital services from the United States. I think you are also underestimating the power of regulation. Not all European businesses have to be all-in for Mistral (or another alternative) to survive. This is one reason so many countries still have domestic defense, aerospace, and even automobile companies.

If the EU can't rely on Nvidia everything must have broken down already, no advanced semiconductor today could be produced by one country only. Unless there's some alternative to ASML and Zeiss the EU is part of that chain.

AI companies will find other ways to make money before global geopolitics find a new status quo. For the coming years, it seems like a perfectly fine business model.

China isn't going to be friendly any time soon and so far America seems to be getting more in rather than less hostile. It wasn't that long ago that an American-Danish war was a realistic scenario.

It is not a good business model _long-term_.

but, if you are lucky, you can but enough time to become competitive in that sector.

This phrasing disregards the value of those traits. For example there are very clean and nice public restrooms at my local park, they may be objectively better products and I use them sometimes, but I usually use the one in my house.

It's also naïve.

This is the same Europe that is gladly mandating age verification for citizens accessing online services, and that is made up of countries that routinely censor speech. There's also a variety of values that make up pan-European politics, both from a national and ideological perspective, that could make these efforts fracture.

If the idea is to not be subject to foreign pressure, maybe there's a short-term argument to be made for this, but like you say, they'll still be vulnerable to hardware imports, which is arguably the main vulnerability.

If the idea is to protect human rights on the continent, this does nothing.

Swiss & Monaco regulated industries can't use US models, nor clouds legally. Not just banking, there is a large part of business data holding identifiers that can't cross borders, military can't be too dependent on foreign hostile powers. If they would be purchasing, they would go for such tailored solution. Things like that add up.

Some of the use may be legal requirement, some is sponsored (as I would expect French government to do, to some extent EU), some are simply moral moves from >95% of the mankind not living in US who watch the news at least a bit. US isn't that big in many regards and its actively harming its reputation daily to the point there is little left.

It is a good business model when the differentiator is that your company doesn't have just two modes:

1. Starting shit.

2. Thinking about starting shit.

At least in the EU people are willing to pay more for fewer features so long as the two mentioned points are not the entire strategy.

There's pretty good consumer protection in the EU. I imagine consumer protection routes probably would apply here.

Definitely not really acceptable though nonetheless; you're a paying customer / subscriber that got 'scammed'...

You should have asked the bank to do a chargeback of the transactions.

Well, they can train in any country they want. It's the inference and data placement that counts for legal purposes

Is this scenario far fetched? Just as Nations pay large companies to build a factory in their country, Nations will similarly pay AI companies to build a national AI model for their own consumption because AI is that beneficial.

It's a risk, but since they have training expertise they should be able to distill the best open source models to reach at least approximate parity comfortably. Frontier model territory looks increasingly out of reach for anyone without $100B for training and then you have to serve inference to recoup cost, that's an expensive proposition in EU.

...OTOH the cost of not sponsoring this in Europe may be complete technological obsolescence. Rock and a hard place situation.

I expect AI to become more like the news, where every country has their own news services, rather than the global monopoly Sam Altman had envisioned. We even see it with Meta, a company that doesn't sell AI. They'd rather build their own models than let one or a few companies have that much leverage over them. This is why it's unlikely open models will disappear. That's the only thing that prevents a global AI oligopoly.

Yes and they are open about it. That is why they are building their own data centers in Paris and other places.

Interesting that you mention commodity, because the better AI models become the more fungible they are. AI companies become like web hosting companies renting out server space with good enough open models. It’s not like Excel that runs the world economy because people don’t want to learn anything else.

I don't know their strategy but I wish they would double up on the open source ecosystem by sharing their innovations like Chinese labs do and use the ones shared as well. I think models in the range of 50B - 250B still have a lot of room to grow and presumably compute to train them should be more accessible than multi-T parameter models.

This would also add pressure on other labs to keep being engaged in the open source ecosystem as a rug pull isn't a small danger IMO.

> in the trendy 10th arrondissement of Paris

> actually in the 2nd

The mixup is easily explainable: machines write numbers in binary notation!