The Economics of Generative AI: A New Perspective

A recent blog post sheds light on the economics of the generative AI (GenAI) industry. Although the figures provided require further verification, the post offers valuable insights on a conceptual level. It illustrates the GenAI value distribution as an ‘A-shape’, with the semiconductor layer at the base receiving the majority of the benefits. This is reminiscent of the cloud industry’s ‘A-shape’ 15 years ago, which has since evolved into a ‘V-shape’, with applications now generating most of the value. The question remains: how will GenAI transition into a ‘V-shape’ with large language models (LLMs) becoming increasingly commoditized, driving a race to the bottom on all metrics, and reaching a performance plateau?

Read the full article here for a deeper understanding of the economics of GenAI.