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Foundation models face commodity pricing pressure

The guest argued that foundation models will behave like low-level commodity infrastructure, lacking long-term pricing power and high-leverage network effects.

The argument

The discussion compared the current AI CapEx cycle to mobile telecom data, where massive demand growth did not prevent a destructive price war. With multiple hyperscalers and open-source alternatives competing, foundation models are expected to face intense price competition, eroding margins despite high development costs.

The thesis, stress-tested

✓ What validates it

✓Hyperscalers cutting API token prices further
✓Consolidation or exit of second-tier foundation model startups

▸ Risks discussed

▸A scenario where only two dominant players emerge with absolute pricing power
▸Models successfully integrating further up the stack to capture user lock-in

Hear it yourself

"coating went from being kind of useful to really changing everything. It's going to be magic, and in twenty years' time, we'll just say, well, of course, that's how it is. Computers have always done that. Every year, Silicon Valley waits for Benedict Evans' presentation."

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