I think there are complicating factors. Investors are throwing unfathomable amounts of money at AI right now, and frontier models are very expensive to build.

I think there are complicating factors. Investors are throwing unfathomable amounts of money at AI right now, and frontier models are very expensive to build. There’s also the issue of these AI-as-a-Service companies requiring an ever increasing amount of GPUs and electricity, and because frontier models keep getting bigger, the problem keeps getting worse. There is a serious risk to these companies. A frontier model doesn’t sit at the frontier for very long. Given a year or two, open source models can catch up for less than 1% of the money spent to build a frontier model. The moat doesn’t last long, so you need to keep burning tens of billions to stay ahead. But as open source models continue to improve, we run the risk of reaching a moment that looks like the current smartphone market. People aren’t upgrading their phones as often anymore because a 4 year old smart phone is still pretty great. There’s no need to buy every year. Well, at some point an open source model will be close enough to a frontier model that many users will just stick with it. They’ll prefer it because there’s no monthly fee to run it on their own hardware, because there are no rate limits, and because they prefer the privacy and flexibility. Right now you need a big cluster of GPUs to run top tier models. But with every passing year we get closer to good-enough open source models running on gaming GPUs. And when that happens, would you want to be one of the investors shoveling tens of billions of dollars into building frontier models with declining subscription numbers where you’ve got no moat? I don’t think the economics of this are going to pan out in the long run. Everyone is still hyped about ChatGPT, so investors are happy to throw money at it. But I think we’re in a very big AI bubble right now. The economics only make sense if someone achieves AGI within the next couple of years. If they don’t, this whole thing is going to decline sharply as open source models provide a better free alternative.