Dylan Patel

By the end of the year, the margins are expanding there despite, hey, more Chinese open source models than ever.

Hey, OpenAI is competitive.

Hey, Google is competitive.

Hey, Xgrok is now competitive, right?

All these companies are now competitive.

And yet, despite this, the margins have expanded at the model layer significantly.

Yeah.

How do you think about the... It's a great question.

The way to frame it, at least the way I currently think about it, and I'd like to hear your view, is that these model companies are all building environments to train their models to use Excel or Amazon Shopping or whatever it is, book flights.

But at the same time, they're also training these models to do migration because that is probably the most immediate valuable thing.

Converting mainframe-based systems to standard Cloud systems, converting Excel databases into real databases with SQL.

Right?

Or converting what is done in Word and Excel to something that is more programmatic and more efficient in a classical sense that can actually be done by humans as well.

It's just not cost effective for the software developer to do that.

That seems to be what everyone is going to do with AI for the next few years at least to massively drive value.

How does Microsoft fit into that if the models can utilize the tools themselves to migrate to something?

And yes, Microsoft has, you know, a leadership position in databases and in storage and in all these other categories.

But the use of, say, a office ecosystem is going to be significantly less, just like potentially the use of a mainframe ecosystem could be potentially less.

Now, mainframes have grown for the last two decades, actually, even though no one talks about them anymore.

They've still grown.