> Hyperscalers don't run computing at some multiple more efficient than on prem.

I'd disagree here. I see two avenues for an efficiency multiple, albeit a single-digit multiple:

* Client aggregation allows a hyperscaler to average out demand spikes from uncorrelated clients, reducing the peak:average demand ratio and allowing better budgeting of compute.

* Dynamic batching allows typical requests to run in batches of more-than-1 and/or overlap, offering better internal compute utilization ratios (e.g. interleaving output and input streams). The small limit of on-device LLMs will run with batch sizes of one with strong memory bandwidth bottlenecks.

For an example of these factors in action, see the API cost differential between batch, standard, and 'fast' processing. OpenAI prices these tiers at a 1:2:4 ratio.