Also, AI's surprising impact on healthcare costs and... what exactly is a bubble? Plus, the widely ignored role AI is playing in pushing healthcare costs higher.
On the AI point, the cost of reasoning with frontier models like Gemini and Open AI is not cheap, also known as token costs. So as companies incorporate reasoning tools into their products, we should expect lower gross margins. The offset would be higher revenue growth in my opinion due to more usage.
That’s why I expect many software companies to have higher revenue growth, but lower gross margins, over the next year.
The timing on highlighting RDW's drawdown is spot on. These parabolic moves in space-related stocks always seem to follow the same pattern when reality catches up with valuaton. What really caught my attention though was the point about AI actually incresing healthcare costs through up-coding and unnecessary spending. That's a second-order effect most people aren't even thinking about yet.
Yes, that is really amazing. That’s all we need. Health costs are way out of control. The US is The Crazy Eddie of healthcare in regard to cost. The prices and increases are insane. Given the costs we should have the greatest longevity rates as well, but we’re not even close and that’s sad.
On the AI point, the cost of reasoning with frontier models like Gemini and Open AI is not cheap, also known as token costs. So as companies incorporate reasoning tools into their products, we should expect lower gross margins. The offset would be higher revenue growth in my opinion due to more usage.
That’s why I expect many software companies to have higher revenue growth, but lower gross margins, over the next year.
Thanks Herb. Have a great holiday. JB
The timing on highlighting RDW's drawdown is spot on. These parabolic moves in space-related stocks always seem to follow the same pattern when reality catches up with valuaton. What really caught my attention though was the point about AI actually incresing healthcare costs through up-coding and unnecessary spending. That's a second-order effect most people aren't even thinking about yet.
Thanks for catching that healthcare part... probably should've led with it!
Yes, that is really amazing. That’s all we need. Health costs are way out of control. The US is The Crazy Eddie of healthcare in regard to cost. The prices and increases are insane. Given the costs we should have the greatest longevity rates as well, but we’re not even close and that’s sad.