[vannevar]

>Commoditization means there's price competition. From a consumer perspective, that's good. You want it to be a low-margin, high volume, competitive business.

You and I may want it to be a low-margin, high-volume business. But the valuations of OpenAI, Anthropic, and much of the rest of the AI industry are not based on that assumption. They are based on the assumption that there will be a couple of winners, like in the smartphone wars, and that those winners will be able to maintain good margins.

[skybrian]

There are low-end and premium smartphones, with different profit margins. Similarly, it seems like open weights models and high-end models could co-exist?

I don’t think there’s any way of knowing what the market structure will be in the end.

[vannevar]

>Similarly, it seems like open weights models and high-end models could co-exist?

Low-end and premium smartphones are still overwhelmingly either Android or Apple. And I'm sure open weights and premium models will co-exist. But that's not the future the current valuations are predicated on. I agree there's no way to say where the market structure will end, but I think we know enough to say where it won't end up. And some of the supporting players are starting to see the handwriting on the wall:

https://www.reuters.com/business/blackstones-qts-terminates-...