Frontier AI Economics

When I say frontier AI model developers have somewhat “speculative” economics, I do not intend to mean it is destined to be bad even though “speculative” does have negative connotation. What I want to highlight is the range of outcomes for frontier AI model developers is still fairly wide, an observation that appears to be largely uncaptured in their private market valuation since their valuations today almost certainly imply model developers to be increasingly in a pole position over time to enjoy attractive net profit margins.

Yesterday, I came across a piece that also hinted at wider range of outcomes from a very different angle: what if one model developer (e.g. Anthropic) indeed becomes a monopoly? How does the rest of the value chain respond in that scenario?

I will bow out today with this short blurb because I would recommend you read this piece by Soren Larson Instead: The Coase Conjecture in AI Inference Markets

In addition to “Daily Dose” (yes, DAILY) like this, MBI Deep Dives publishes one Deep Dive on a publicly listed company every month. You can find all the 66 Deep Dives here.

Current Portfolio:

Please note that these are NOT my recommendation to buy/sell these securities, but just disclosure from my end so that you can assess potential biases that I may have because of my own personal portfolio holdings. Always consider my write-up my personal investing journal and never forget my objectives, risk tolerance, and constraints may have no resemblance to yours.

My current portfolio is disclosed below: