I suspect, but don’t have proof that:
- Frontier model progress will slow as we exhaust training data and known scaling methods. Gains will be incremental, not fundamental.
- Performance gains will come from harness / software architecture changes (eg. MoE, internal “agents” within models, various methods for effort/thinking within the models), not from new secret science.
- The “brute-force” nature of training very large models and access to data will continue to be an advantage for the frontier labs, but this advantage will not be an uncrossable moat.
- Model distillation will continue to be a reality, allowing non-frontier labs to ride the coat-tails of frontier labs.
- There will be good-enough non-frontier models at much lower prices that lag frontier performance by ~1 year, ala DeepSeek 4.
- There will be meaningful progress in running these locally / on-edge.
- Apple will be a fun participant here, and might end up being a surprise winner.
- There will be meaningful progress in running these locally / on-edge.
- Gains from harness and software architecture will be applicable to the non-frontier models, and in fact non-frontier models may lead the charge, allowing the non-frontier models to take advantage of the lower-cost gains.
- The economic reality of AI spend vs real world value will hit the world front-and-center, forcing companies to evaluate and optimize their AI spend, driving many use cases to non-frontier models.
- The non-frontier models will be good enough for many classes of problems, leaving the top tier frontier models with interesting but fewer real-world applications.
So - while I very much enjoy and encourage the era of subsidized access to great models and the speculation driven investment in training of models, I worry that we will be facing a re-adjustment and correction, with LLMs mostly becoming a utility / commodity.
Therefore: I don’t have a strong enough thesis to be bullish on AI lab stocks in the long term. In the short term there will be plenty of opportunity for plenty of money making, and certainly a few very big winners will emerge, but I’m not sure how exactly it'll play out.
I seem to be in the minority on this opinion, I'd love to be corrected, if I have the fundamentals wrong please let me know.