Open Source Models On Local Hardware Threaten To Disrupt AI Industry
An X post from Perplexity CEO Aravind Srinivas argues that open models on commodity hardware could do to cloud AI what Linux and x86 once did to Sun Microsystems.
Entities: Aravind Srinivas, Sun Microsystems, Oracle
In a post on X, Perplexity CEO Aravind Srinivas argued that Sun Microsystems' collapse after Linux, x86 and commodity hardware undercut its server business is a useful analogy for AI now. He argued that open source models running on local hardware could put similar pressure on today's cloud-heavy AI leaders. The post spread through Jason Calacanis's quote-post on X, which framed the comparison as a "spicy take."
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Spicy take 🌶️!
At its peak, Sun Microsystems was valued at 205B (394B if inflation adjusted). Sold software in enterprise servers. Got disrupted by Linux, x86, and commodity hardware. Ended up selling to Oracle for 7.4B, losing 96% of its value. Open source models running on local hardware can have a similar impact given what’s going on.
I am old and was around for Sun's demise. Aravind's reasoning is 100% true. Sun sold web servers that cost a million dollars each, with expensive services wrapped around them. They could do incredible things small Linux servers could not. For example, you could hot swap cards out of a Sun server WHILE it was running. But a fully loaded Linux web server cost maybe $10,000, so you could buy ten and still save 90%. People rushed for the cheap Linux boxes. Sun tried to adapt, but the whole org was built around million-dollar servers. They just couldn't change. This all happened very quickly, about two years if I recall correctly. Lots of parallels to expensive cloud AI and local AI. If Kimi K3 ships open weights as promised, you could run it on a couple of future Mac M5 or M6 or M7 systems (whatever ends up shipping) for maybe $50,000. And local AI is the worst it will ever be today. Think where it is in two years. I don't think Fable 5 at $50/MTok output is sustainable.
At its peak, Sun Microsystems was valued at 205B (394B if inflation adjusted). Sold software in enterprise servers. Got disrupted by Linux, x86, and commodity hardware. Ended up selling to Oracle for 7.4B, losing 96% of its value. Open source models running on local hardware can have a similar impact given what’s going on.