A foundation model is a large, general-purpose model trained on broad data that serves as the base for many applications — via prompting, fine-tuning, or tool integration. GPT-class and Claude-class models are the canonical examples.
The foundation-model layer is where capability, cost, and concentration of power live. Most AI products you use are applications on top of a handful of foundation models.
A writing assistant, a coding helper, and a customer-support bot can all be built on the same foundation model with different instructions and data.