Baker: Model routing cuts costs via margins without reducing compute demand
Gavin Baker · Why the Markets Are Pricing AI Wrong | Gavin Baker · Invest Like The Best · Aug 4, 2026 · at 30:38
Gavin Baker, Managing Partner at Atreides Management, explains to Patrick O'Shaughnessy why enterprise optimization and open-source model routing do not reduce aggregate demand for AI hardware infrastructure.
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“You can, in a lot of cases, get slightly better outcomes at half the cost. But again, that half the cost, I think a lot of people hear that, they're like, that's bad for AI demand. It's actually not at all because the cost the user pays has, you know, is just a function of the margin on the tokens, and you're literally just shifting tokens from really expensive tokens with like, 90% gross margins to tokens with maybe, let's call it a 30% gross margin. And that's where the savings are coming from, but the tokens cost the same amount of compute To produce.”
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