Closed Source vs Open Source AI: A Cage Fight Few People Understand (13 minute read)

Open source models are reaching parity with frontier labs' models, making those labs' equity look overpriced if they're simply utilities. These frontier labs have enterprise agreements, safety certifications, distribution, research talent, and regulatory positioning, but that doesn't explain their moat. People focus on capability, but the number that actually matters for valuations is the monetizable spread, the subset of that capability delta that someone will actually pay a premium for. The monetizable spread is declining faster than the capability spread.