It's a terrible moat. You etch the silicon then nobody wants to run it in 6 months because models have advanced that much further.

This is only true for people who are solely focused on performance. There is absolutely a market for acceptable performance combined with predictability.

Not so if it's embedded in something smart enough for its intended purpose.

Think vision, spatial reasoning, speech synthesis, even some speech analysis. Think self-driving cars (and drones) that need 10x less power for the brain, and can think at 10x situation per second.

OTOH, people get a new iPhone every year and they are ok with it.

If a model is good enough today, it's still gonna be good enough in a year. Except you'll be able to serve it 1/100 of the price. Or 100x the speed.