As AI models become interchangeable commodities, the contest is down to service prices – which are driven by electricity output and cost
This rapid proliferation reveals the true nature of AI, whether a large language model or specifically a generative pre-trained transformer. It turns out it is not that hard to create an AI model. Hence, the value of owning a model, whether frontier or not, isn’t so high any more. As more models join the market, they will become a commodity, like steel or aluminium. And the price of services, or tokens, will be driven by the dominant cost component: electricity.
Last year, the levelised cost of solar power dropped to about two US cents per kWh. Given that transmission and delivery prices from the deserts in the west to the industrial belt in the east can easily double the electricity cost, the rational choice is to locate the data centres in the west, next to the solar farms.