@arakharazian ↔ @GavinSBaker conversation
Ara Kharazian@arakharazian
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Oct 11, 2026
~1 min read
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Ara Kharazian@arakharazian
A lot of people sharing this, but the decline is driven by price cuts at the frontier, in turn driven by competition between OpenAI and Anthropic.
Not open source models, which are <5% of business spend.
And if frontier models see a hit to their margins, that will depress their ability to reinvest in infra.
Not open source models, which are <5% of business spend.
And if frontier models see a hit to their margins, that will depress their ability to reinvest in infra.
Gavin Baker@GavinSBaker
Why open-weight models that compress margins at the model layer are net positive for AI infra demand, exhibit 1001.
An open-weight token consumes *roughly* the same amount of compute as a frontier token for a similar size model.
An open-weight token consumes *roughly* the same amount of compute as a frontier token for a similar size model.
Gavin Baker@GavinSBaker
Hmm. Let’s think for a second.
Why are the frontier models cutting price? Might it possibly, just possibly, be a result of the fact that they are losing share to open-weight models?
Given positive elasticity, their price cuts are clearly good for AI infra demand.
Open weight models are positive for AI infra demand, exhibit 1002.
And obviously the semiconductor companies and cloud companies would fund open-weight training if necessary. Jensen already is!
OpenAI and Anthropic have locked in years of compute at below market prices. Other companies would happily assume these commitments at *higher* prices.
Also I’ve always wondered if “missing the forest for the trees” is an idiom, a proverb or an aphorism. Do you have a nuanced view on this?
I am going to ask everyone this question from now on when appropriate.
Why are the frontier models cutting price? Might it possibly, just possibly, be a result of the fact that they are losing share to open-weight models?
Given positive elasticity, their price cuts are clearly good for AI infra demand.
Open weight models are positive for AI infra demand, exhibit 1002.
And obviously the semiconductor companies and cloud companies would fund open-weight training if necessary. Jensen already is!
OpenAI and Anthropic have locked in years of compute at below market prices. Other companies would happily assume these commitments at *higher* prices.
Also I’ve always wondered if “missing the forest for the trees” is an idiom, a proverb or an aphorism. Do you have a nuanced view on this?
I am going to ask everyone this question from now on when appropriate.
