Warren Buffet way

Revolutionary technology + massive adoption ≠ good investment

Investors have poured money into a bottomless pit, attracted by the growth and glamour of the industry. The airline industry since its birth has had a collective net loss, in aggregate, despite moving hundreds of millions of people.

Commodity Product, no switching costs. Infinite competition

The airline industry since its birth has had a collective net loss, in aggregate, despite moving hundreds of millions of people.

The industrialisation essentially socializes the cost across a lot more people though, so even though it doesn't make a profit it does mean people can have air travel without it costing millions per flight for the few people who can afford it. Essentially the economies of scale from having lots of flights isn't enough to make it profitable but they are enough to make it affordable.

There's no spare money to extract from the airline industry but it's still very useful. The same could be true for AI in the long term.

Sometimes the goal of an industry is to exist rather than to make a profit, because the benefit to society is more important than profit. People don't like that though so they do a bit of creative accounting or head-in-the-sand denial around it.

> The airline industry since its birth has had a collective net loss

True. But it has added enormous benefits to many other parts of the economy.

Airlines do not capture that value.

That is where the AI companies are. Adding value they cannot capture

It isn't a commodity product in my opinion. Far from it. I think it will ultimately be a monopoly or duopoly for SOTA. The mid to low end is commodity, yes. But SOTA models are not commodities.

The number of competitors for SOTA drops by a few every year. The winners make more money, get more revenue, buy more compute, train better model with compute, buy best talent, and the cycle goes.

I think it's easier to fall behind and never catch back up than people think. One disastrous training run can leave a lab months to a year behind. For example, Meta's disastrous LLAMA 4 models. Meta is lucky to have their ads business as a funding source. However, Anthropic's revenue is growing so fast, that ability to use ads as a funding source to stay in the race may not last much longer for Meta.

To me, SOTA LLM training is very much like new chip fab nodes. One disastrous node can put you behind for many years or forever. The cost to build the next chip node doubles every every 4 years (Rock's law). The cost to train the next SOTA model likely has some similar power law which means over time, it's too costly for losers to keep up. The only reason TSMC isn't a defacto monopoly for advanced chip nodes is strictly due to geopolitics.