What Do Open Models Do to AI Margins?

Misha Laskin says open models compress margins across the whole AI stack. A company wins by serving great intelligence, holding a lot of compute, and earning trust from customers.

Everything across the stack is so hyper competitive that it is getting commoditized. Model margins are going to be compressed. Open models lead to margin compression against closed models, and margins also compress in applications, the inference layer, and bare metal. AI-native companies negotiate closed deals very aggressively because the open ecosystem exists. For any of them, the factors are the intelligence density served to customers, how much compute they have, and how much trust they have because they drive successful solutions.

With great open models and accessible intelligence density, many companies can succeed, and the split is how much compute each one can assemble. A great intelligence builder on the closed side sees revenue shoot up and can amass more compute than anyone else, which creates a strategic position. What it takes to win is great intelligence, a lot of compute, and trusted customers.