The term overlaps with vertical AI but points at something narrower: the knowledge itself. A domain-specific system holds an explicit model of a field's entities and how they connect. That structure guides the AI toward correct answers and away from plausible-sounding errors.
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This matters because language models generalise. Ask a general model about a specialised topic and it will answer confidently, sometimes wrongly. A domain-specific system constrains the response to what the field actually holds true.
The result is reasoning that a specialist recognises as sound, with terminology used precisely.