

The incumbents will go broke.
Who do you mean with that? Companies like OpenAI or Anthropic, or do you also include the likes of Google/Amazon/Microsoft?
With the former I can see it, but the later also profit from providing the infrastructure (and have other profitable business), so imo those will be just fine.
As i understand it most of the money they are investing goes into new datacenters. So when a model gets outdone by a new one they still have those, unlike e.g. OpenAI that use other companies resources (i think microsoft and oracle mostly?). In a way companies that use those external clouds to train their own models are financing the investments needed for the big players.
AWS, GCP and Azure are all growing 30%+ yoy, are profitable and if anything supply constraint in that they can’t build more capacity fast enough to meet demand. So it seems to me that to some degree they are already recouping some of those investments. I don’t see a drop in demand for compute, and even if using/training ai would become less resource intensive, Jevons paradox would just lead to more demand.
Of course they also burn a lot of money as anytime a new model gets trained and beats the older ones, it kind of renders the resources spend on the previous one worthless. But to me that seems like the cost of doing business.
The current investments they can afford. What would actually lead to shedding huge amounts of marketcap is, if they’d let a rival establish themselves. Similar to how the movie studios didn’t get into streaming early (mostly to not hurt their cable business) and gave Netflix enough time to establish themselves.
To comment on something you mentioned in another reply below:
I think the big money will be in the business world, where salaries for actual people are high enough that saving a person even a few hours/week or replacing a single employee saves so much money that even expensive subscriptions would easily be worth it.
On the consumer side as you say running smaller models locally will likely be the norm. But that means it would be free for both the likes of Deepseek and Google. And then it’ll just come down to who has access to personal information and is better embedded, which would be likely be whoever also controls other aspects of a users life, such as Goole with Android, gmail etc. Money here will be made just as it is done with other free services.