I disagree. Yes, the VC funding will dry up, but hardware and algorithmic advances will decrease running costs by equal amounts.
Lack of a moat will prevent companies recouping past expenses, since any who try will be outcompeted by new market entrants who don't have those past expenses.
I think we'll see a lot of vendor lock in by introducing service complexity. We are already at a point where the hassle of switching from one big API provider to another is not always worth the hassle for a small reduction in price or a tiny improvement on some benchmarks. AI will go the same route as all SaaS products until we have GAI-level stuff running locally on affordable consumer hardware. And there's a lot of money to be made until then.
As with the cloud, prices increase once competition dries out. Even if hardware becomes cheap, the services will cost more because shrewd and greedy boards run most businesses.
2. We have at least one real-world example suggesting profitability is challenging. Microsoft is reportedly still losing money on GitHub Copilot, even after years of operation and many paying customers.
These companies, yes. But new startups will come, spend only millions, and achieve the same thing. No moat.