🚀 J.P. Morgan just sounded the alarm: The cost of using AI models has COLLAPSED. While this is fantastic news for the diffusion (the spread) of AI technology across every industry, it spells potential trouble for the foundational model providers (the big labs like OpenAI, Anthropic, etc.). The Looming Threat: Commoditization Good News: Cheaper AI fuels faster adoption and innovation at the application level. Bad News: Falling costs signal commoditization. Once model development plateaus, remaining margins will be aggressively competed away. The race to the bottom is real. Where Value Shifts ➡️ The Application Layer JPM’s core thesis: Value creation is moving UPSTACK. The big AI labs that supply the foundational models are starting to look less like high-margin tech giants and more like Internet Service Providers (ISPs). They’ll provide the essential, powerful pipes, but the unique, high-margin, sticky value will be found in the applications built on top of those pipes. The “ISP Trap” for Foundational Models Think of the telecom industry: Massive, world-changing investments (3G, 4G, 5G). The underlying technology (the connectivity) becomes a ubiquitous commodity. New upgrades will come, but they won’t be exclusive to one provider for long. The foundational model providers may follow a similar path: They will make massive, world-changing investments, but their product may become a commodity before they can harvest the high return on investment (ROI) their valuations are currently pricing in. #AI Investing TechTrends Commoditization FutureOfWork #JPMorgan
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@themerchantsnews 🚀 J.P. Morgan just sounded the alarm: The cost of using AI models has COLLAPSED. While this is fantastic news for the diffusion (the spread) of AI technology across every industry, it spells potential trouble for the foundational model providers (the big labs like OpenAI, Anthropic, etc.). The Looming Threat: Commoditization Good News: Cheaper AI fuels faster adoption and innovation at the application level. Bad News: Falling costs signal commoditization. Once model development plateaus, remaining margins will be aggressively competed away. The race to the bottom is real. Where Value Shifts ➡️ The Application Layer JPM’s core thesis: Value creation is moving UPSTACK. The big AI labs that supply the foundational models are starting to look less like high-margin tech giants and more like Internet Service Providers (ISPs). They’ll provide the essential, powerful pipes, but the unique, high-margin, sticky value will be found in the applications built on top of those pipes. The “ISP Trap” for Foundational Models Think of the telecom industry: Massive, world-changing investments (3G, 4G, 5G). The underlying technology (the connectivity) becomes a ubiquitous commodity. New upgrades will come, but they won’t be exclusive to one provider for long. The foundational model providers may follow a similar path: They will make massive, world-changing investments, but their product may become a commodity before they can harvest the high return on investment (ROI) their valuations are currently pricing in. #AI Investing TechTrends Commoditization FutureOfWork #JPMorgan
