Foundation model API providers will eventually operate as a high-margin oligopoly
David George · a16z's David George on the Most Controversial Bet at a16z & Do Margins and Revenue Matter in AI? · 20VC with Harry Stebbings · Dec 15, 2025 · at 44:42
David George, General Partner at Andreessen Horowitz (a16z), outlines his thesis on the future market structure and margin profile for AI model providers.
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“I think the market structure will end up sort of like cloud for the models where, you know, cloud costs for the average end customer are fine. And, you know, cloud's an oligopoly and they make high profits. I think the model companies, you know, that serve APIs will be relatively oligopolistic. They'll probably have reasonably high margins and the end customers will be pretty high served or well served.”
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