Deep Seek and LLM Profit to Zero
5LLM Market Analysis & Future Predictions
Market Dynamics
• DeepSeek disrupting LLM space by demonstrating lack of sustainable competitive advantage
• LM Arena (lm.arena.ai) shows models like Gemini, DeepSeek, Claude frequently exchanging top positions
• ELO rating system (used in chess/UFC) demonstrates eventual market parityRestaurant/Chef Analogy
When multiple restaurants compete for one talented chef, profits flow to the chef rather than creating sustainable advantage for any restaurant - illustrating perfect competition in LLM space.
2025-2026 Predictions
• Heavy investment in GPUs/expensive engineers won't provide significant advantages
• Evolution similar to Linux's displacement of Solaris
• Growth of local/open-source models driven by:
• Data privacy/legal concerns
• Data breach risks
• Decreasing profit marginsConclusion
Commercial AGI models likely to give way to open-source and local alternatives, with market forces driving profits toward zero through perfect competition.
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