Comment by cogman10
5 hours ago
What I suspect isn't that AI goes somewhere, but I do think that the cutting edge companies like Anthropic and OpenAI are in a very precarious position. They don't have very much of a moat and the competition has been catching up quick while spending a lot less doing so. IMO, the main thing keeping them alive right now is name recognition.
If I were to make a prediction, it's that ultimately these cheaper models are going end up eating their lunch. I don't think they'll make back the money they've invested and once that reality hits investors, those two companies are sunk.
That, however, is not the end of AI. Nor will it be the end of Nvidia/micron/etc. It will more just be a localized bubble pop that doesn't eliminate the product from the market.
It is not just about cheaper models; it is about integration with the economy.
These models are building deep integrations into companies and the entire economy. Once that stabilizes, it will be like the electricity grid—pumping tokens to fuel decision-making across the entire global society. Good luck unplugging from that.
Furthermore, there is a massive geopolitical aspect to it: those who are already on the Western financial and technical stack will get integrated even deeper now.
> These models are building deep integrations into companies and the entire economy. Once that stabilizes, it will be like the electricity grid—pumping tokens to fuel decision-making across the entire global society. Good luck unplugging from that.
Much like the electric grid, what we are seeing is a convergence on standard APIs. For example, most of these cheaper models are hosted using APIs compatible with OpenAI. It's not a matter of rewiring your electric plug to work with a different socket standard, instead it's just the process of plugging it into a new socket.
> Furthermore, there is a massive geopolitical aspect to it: those who are already on the Western financial and technical stack will get integrated even deeper now.
Certainly the Chinese models appear to be some of the best when it comes to competition, but they aren't the only ones. There are European models and other US based models which all run for cheaper.
I see your point, but having worked as a consultant for a few years, I think most companies will opt to stay once things are stable. Once these systems are functional, nobody wants to touch them.
I remember one government project where we wanted to migrate a system from COBOL to a modern stack. The requirement was for the UI to stay exactly the same as the old green terminal; the evaluation criterion was pixel-perfect proximity to the original. We literally had to build terminals using web tech.
These models are not the same as each other. Once they are integrated and working, the incentive to change them is incredibly low. So really, the race is about who can integrate deeper, wider, and faster over the next couple of years—that is what will determine the long-term winners.
This is the exact same playbook we saw with social networks. There is a reason why we have only a handful of them dominating globally, and guess what? It's not because of the tech.
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The moat is the infrastructure and lock-in. Similar to AWS or anything else. Small data centers can't compete, and similarly people without massive compute won't be able to either (at least not on the enterprise level.) You might get a few edge models, but for huge businesses they will be using OpenAI and Anthropic (and Google/Microsoft/Amazon, etc).
The biggest competitors aren't small models, they are just the traditional players that already have an "in" with enterprises. That I think will start to show its face once this initial round of buildout is complete, which may not be for another 5+ years.
> The biggest competitors aren't small models
I disagree. Mainly because those small models are exactly what erode away the moat of needing a giant data center. Those smaller models have been proving themselves to not be far of from the SOTA models.
As OpenAI and Anthropic look to raise their prices, businesses will be much more compelled to looking at cheaper models. And if the narrative is "do the same as you did with OpenAI at 1/20th the cost" that's going to sell to a lot of businesses.
It certainly cuts into what exactly these companies can sell in general. For example, if I wanted to integrate AI into a product I'd almost certainly not chose OpenAI or Anthropic. That's because they are simply way too expensive and what they'd give me is a lot less. We've actually ran into just this. We needed a classifier for a lot of records, we picked a free model because, as you can imagine, we didn't need something as good as what OpenAI and Anthopic offered and free works.