Source: Gettheleverage
The economics of AI capability have inverted so dramatically that massive capital deployment no longer guarantees competitive advantage. Frontier model performance now commodifies within months as open-source alternatives and smaller competitors close the gap. This collapse in moat-time threatens the venture-funded scaling narrative that has underwritten the entire AI infrastructure build, forcing capital to chase defensibility through data, distribution, and domain application rather than raw model superiority. Expect consolidation around companies with existing network effects—search, social, enterprise platforms—rather than pure-play AI startups, and a recalibration of valuations away from the scaling thesis.