Who Wins Between Open and Closed AI Models?
Satya Nadella says most AI token use becomes a commodity that may be open weights or cheap closed models, while a market for frontier models remains.
Harry Stebbings asked what percent of traffic goes through open versus closed models in 24 months, looking at both traffic and dollars. Satya Nadella says it depends on what the frontier looks like. Most things get saturated, and then open weights or cheaper models of closed weights work. If a company can train on its own traces, it does not need the latest model for a problem that has not changed. If an eval keeps moving forward, the company may still pay for a frontier model. He says there will always be a market for frontier models, because there is always some new thing, and science may be the next place a frontier is set. Agent swarms can call sub-agents that are local models. Predominantly, token usage will be commodity token usage. The commodity may be open weights or cheap closed weights, because there will be lots of price competition. Inside Copilot, Microsoft uses cheaper closed models along with open-weight models.
