Economist Noah Smith recently posited that artificial intelligence (AI) may evolve into a commodified product, similar to solar power or steel, which could significantly limit profitability for its creators despite its pervasive integration across industries. Smith, a prominent economic commentator known for his "Noahpinion" blog, shared this perspective on social media, sparking discussion on the long-term economic trajectory of AI. His analysis suggests that widespread adoption does not automatically guarantee high returns for the companies developing core AI technologies.
"People are discounting the possibility that AI might turn out to be like solar power or steel -- a commodified product that underlies everything in the world, but which doesn't make much profit for the people who create it," Smith stated in his tweet.
Smith's argument centers on the idea that intense corporate competition within the AI sector will ultimately drive down profit margins. He has previously elaborated that investors are aware of this competitive landscape, anticipating that it will restrict how much AI companies can profit from their innovations. This perspective challenges the common narrative that AI will inherently lead to massive, sustained windfalls for its primary developers.
The commodification of a technology implies that its core components become standardized and widely available, leading to price pressure and reduced margins for producers. Historically, industries like steel and solar panels have seen their foundational products become essential but low-margin commodities as technology matured and competition intensified. Smith suggests AI could follow a similar path, becoming a fundamental utility rather than a source of extraordinary, sustained profits for a select few.
This view comes amid a significant AI data center building boom, which Smith has also highlighted as a potential area of economic vulnerability. While the demand for "compute" power is immense, particularly for inference (running AI models), the underlying infrastructure could also face commodification pressures. The economist's insights prompt a re-evaluation of investment strategies and long-term economic models for the rapidly expanding artificial intelligence industry.