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by dofm
3 days ago
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> That directly undermines his claim that providers always need to chase frontier intelligence in order to maintain current demand, utilization, and pricing curves. But does it also not mean that they will make less money given that there is already brutal competition for that lower tier from openrouter, Deepseek, Amazon, etc.? You can't on the one hand say "customers are beginning to understand they can spend less" and on the other hand suggest that this is good for forecasts of revenue. |
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Sure you can. Just because there is a non-zero amount of margin pressure from the lower tier inference providers does not imply that revenue forecasts ought to be poor. Jevon's Paradox gets oversold in this current cycle, but I do think it's a relevant lens to view this through given how much demand has outpaced capacity.
The argument is that customers learning to spend less per task can be good for the viability of the market (really the total demand) even if it is bad for naive revenue-per-token assumptions. If a workflow goes from economically stupid to economically viable because you route 80% of it to cheaper models and reserve frontier models for the hard cases, that can expand total usage and improve cost per useful outcome.