My laptop already works too hard doing development and having chrome open, it's just not feasible. A good hosted alternative, sure, but local is not going to scale to the masses.
Most of peoples' problem is watching the AI type, it's not instant, but then not all (or even most) applications need to be instant. You can also avoid that by having it return everything at once instead of streaming style.
Local absolutely can scale. All kinds of fun things can be done on a machine with 16GB of RAM, or 8GB if you work harder.
Funny, for me it is the complete opposite. I created an interface in Matrix that does just that: return everything at once. But the lag annoys me more than the slow typing in the regular chat interface. The slow typing helps me keep me focused on the conversation. Without it, my mind starts wandering while it waits.