AI has an interesting economic trait in that it's very, very expensive to deploy, and made very fast progress from 2022 to 2024. That caused investors with money to believe that:
- Pushing the frontier was going to cost a lot of money. More than any other purported revolutionary tech.
- Extrapolation of past improvement meant that whoever was on the cutting edge may end up with a product with a huge paying market.
- So whoever wins this race would be rich, and the investment would have been worth it for them.
But since 2024, we've seen that the cutting edge got even more expensive much faster than expected, and much of the improvements in performance now come from inference rather than training, which represents a high ongoing cost.
Now, if we extrapolate from that trend line, we'll see that the market will be much smaller for AI services at the cost it takes to provide that service, and the question then becomes whether the industry can make its operations cheaper, fast enough to profitably provide a service people will pay for.
I have my doubts they'll succeed, and we might just be looking at the industry like supersonic flight: conceptually interesting, technically feasible, but just a commercial dead end because it's too expensive.