How Chinese Open-Source Models Are Rewriting AI Economics — 5Y Capital's Xing Meng · 2026-08-18 · primary
Themes: Open Source as Strategy · US-China Framing · Closed vs. Open Split · Economic Argument · Spectrum of Motivations
Open models damage the business case of closed models by putting downward pressure on prices.
I think the interesting observation I had is that despite the heated debate and also the great attention that has been placed on you know open source and K3 and and so forth uh if you're talking to Frontier Labs the researcher and so forth they haven't cared much about this few of them actually have tried uh those models and that was a surprise to me I thought this will be you know this is sort of your direct competition right and this is uh you know not just not only from a competition standpoint but also from a um sharing sort of p you know tech tech report and papers perspective.
How Chinese Open-Source Models Are Rewriting AI Economics — 5Y Capital's Xing Meng · 2026-08-18
So the total revenue if if it's flat in terms of total total cons consumption let's just say I don't know if it is but let's assume it is and total revenue will be going going down because people are swapping more expensive model with cheaper models in that way so uh there's large impact and the reason behind that is you know you're seeing the agent companies the the users the individual coders they are making that change as well and there's innovative ways to do that you might not swap it all the way you might be using um you know say the likes of K3 or Deepc to write your code and then still use cloud to review your code right use a combination of that to maintain certain accuracy and and performance along the way and well for most people it's you can hardly tell difference u from from that perspective unless you're very very intense users or or you are using it for for highly complicated problems in that way but then if you look back even among the uh Anthropic models uh between Fable 5, between uh Opus 5 and Opus 4.8, sometimes even Opus 4.6, people can't decide which one is better for their particular task.
How Chinese Open-Source Models Are Rewriting AI Economics — 5Y Capital's Xing Meng · 2026-08-18
the cheapest way but still cheaper obviously than than the other models of the same size and so forth.
How Chinese Open-Source Models Are Rewriting AI Economics — 5Y Capital's Xing Meng · 2026-08-18
Safety and innovation trade off against one another: what makes a model safer makes it less capable or less widely available, so pushing on one goal costs ground on the other.
So, so that really you know surprised me um as well and uh given how limited resource they have in terms of compute in terms of people and also importantly uh and this is well we discussed as well is that they made a lot of fundamental innovations in the model architecture on this model that they just released and um although they have tested out a lot of those on the uh toy model in you know 40 uh billion parameters or 30 billion parameters. It's still a big feat to integrate those research efforts into the actual 2.8 trillion parameter model which is uh you know huge feat.
How Chinese Open-Source Models Are Rewriting AI Economics — 5Y Capital's Xing Meng · 2026-08-18
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