Benedict's Newsletter: No. 641

Foundation model commoditisation

The Microsoft-OpenAI hosting exclusivity breakup is fundamentally about the ongoing commoditisation of foundation models, not just capacity management or politics.

OpenAI competitive position

OpenAI lacks unique tech, has limited user engagement and stickiness, no network effect, and incumbents have matched the tech while leveraging superior product and distribution.

AI pricing shift

The move from flat-rate to usage-based AI pricing mirrors mobile data pricing in the early smartphone era, driven by the same mismatch between flat-rate economics and significant marginal cost.

Meta capex and ROI

Meta's AI ROI must come purely from better ad yields and vague 'stuff' without an enterprise cloud business, and investors remain upset about ~$100bn spent on Metaverse.

China Manus deal reversal

Unwinding the Manus deal is easier said than done since there are no physical assets to return, just IP, know-how, and people already integrated into Meta for months, and there is no due process.

Deepseek new model

Deepseek's new flagship model is merely OK, landing at the bottom of the top dozen, without the shocking cost savings that caused panic a year ago.

Usage-based token pricing replacing Flat-rate monthly AI subscriptions

Anthropic and GitHub are both shifting from flat-rate monthly pricing to explicit usage charges as agentic coding drives orders-of-magnitude more compute consumption.

Engineers switching from Flat-rate monthly AI subscriptions to Usage-based token pricing