Commentary: Open source could pop the AI bubble – and soon

A recent study by MIT economist Frank Nagle shows exactly how good open AI models have become. They are on average six times cheaper to use than equivalent closed models. And they are narrowing the performance gap within a few months of each new closed-model release. The speed of this catch-up cycle is accelerating.

If users were to choose the best observable AI model based on both price and performance they could save US$20 billion to US$48 billion a year.

Of course, both OpenAI and Google also developed open models – free to use and somewhat flexible. But these often feel like side projects. They are unlikely to win market share unless the companies put more work into them.

COMPANIES LEADING IN OPEN-SOURCE AI

The companies that are leading in open-source AI are Chinese. Models by DeepSeek and Alibaba regularly excel in widely used AI benchmarks. 

A recent study by MIT and developer platform Hugging Face showed a steep decline in the market share of open models from Google, Meta and OpenAI, and a sharp increase in the use of models like DeepSeek and Qwen.