AI is in a supply crunch today, but what happens when we come out of it? How and where will supply, demand, price, capacity and capex get back into equilibrium? Today, model labs can name their price, but why won’t they end up as low-margin commodity infrastructure?
The current AI supply crunch, driven by high demand for advanced models and limited compute, is creating short-term pricing power for model labs. However, this is likely an unsustainable state if market forces normalize supply and demand.
A strategic reader should care because the eventual commoditization of AI infrastructure will fundamentally alter business models, competitive landscapes, and investment strategies across the technology sector.
The current pricing power of AI model labs is temporary; the market structure will shift towards lower-margin commodity infrastructure as supply increases and technology matures.
- · Large cloud providers
- · Enterprises leveraging commoditized AI
- · Developers of AI applications
- · Specialized AI model labs
- · Early-stage AI compute manufacturers
- · Investors betting on sustained high AI margins
Increased investment in compute infrastructure to alleviate the supply crunch.
Downward pressure on pricing for AI model access as supply expands and competition intensifies.
AI becomes a widely accessible, low-cost utility, spurring innovation in new application layers and potentially leading to unexpected societal impacts.
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