An analysis argues that companies building large language models (LLMs) may struggle to achieve profitability due to unfavorable industry structure. The article’s author, Cal Paterson, compares LLM makers to airlines, which historically faced poor business conditions despite their technological importance. The key challenge lies in NVIDIA’s monopolistic position as the sole supplier of essential training chips, while LLM companies face strong competition, easy market entry by new players, and limited customer loyalty.
The business environment for LLM makers shows similarities to failed tech companies like Netscape rather than successful ones like Google. Despite recent large investments, including OpenAI’s $6.6 billion funding round at a $157 billion valuation, fundamental structural challenges remain. The article suggests that while LLM technology itself may advance significantly, companies building these models may not capture much of the value they create.