Small AI startups face significant challenges in competing with large tech companies due to a lack of resources such as data and computational power. However, they can leverage their agility, innovation, and focused expertise to carve out their niche and stand a chance against bigger corporations. Strategies like niche specialization, collaborations, customer-centric solutions, feature density differentiation, owning new product categories, use of open source and public datasets, innovative monetization models, and focus on talent recruitment and retention can help AI startups to thrive in the competitive landscape.