Executive Summary (For Builders and Founders)
2025 saw a shift in AI progress aligned with GMI Cloud's predictions.
Raw model capability continued to improve, but it stopped being the dominant source of advantage. Teams that won moved faster not because they had better models, but because they built better systems around increasingly interchangeable intelligence.
Three forces defined the year:
- Inference economics and latency reshaped products, not just infrastructure
- Model choice became reversible, while system design became sticky
- Operational maturity separated durable companies from impressive demos
Builders who anticipated these shifts gained compounding leverage. Builders who didn’t paid in rewrites, cost overruns, and stalled velocity.
What follows breaks down where the stack actually moved and how early vs late responses created real consequences.
1. The Center of Gravity Shifted: From Models to Systems
Model quality improved again this year. But the returns diminished. What changed outcomes was not which model teams chose — it was how they composed models into systems.
Builders who moved early:
- Treated models as interchangeable components
- Invested early in routing, fallback logic, caching, and observability
- Designed products assuming model churn
Builders who lagged:
- Anchored roadmaps to single-model upgrades
- Discovered too late that model swaps broke UX assumptions
- Found differentiation eroding faster than expected
We observed that systems maturity increasingly determined velocity and reliability, resulting in winning market share and customers. Here’s something to test: If your AI product cannot survive a forced model swap in 30 days, it is not production-ready.
2. Inference Became the Real Bottleneck
Training still defines the ceiling of capability. On the other hand: Inference defined the floor of reality.
This year, latency, throughput, and cost stopped being infra concerns and started dictating product decisions:
- Features were redesigned or cut due to token cost
- UX flows were reshaped to hide latency
- “Good enough” responses beat perfect ones that arrived too late
Builders who moved early:
- Benchmarked under production-like load
- Designed UX with latency budgets, not model demos
- Treated inference cost as a product metric
Builders who lagged:
- Optimized after launch
- Confused per-token pricing with total cost
- Rebuilt pipelines under customer pressure
Optimized inference became a gating constraint separating pilot AI projects from winning ones.
3. Open and Semi-Open Models Quietly Became the Default
Open models stopped being ideological choices and more operational tools.
For most real workloads, open and semi-open models reached sufficient quality — and offered something proprietary APIs couldn’t: control.
Builders who moved early:
- Used open models to reduce lock-in and regain negotiation leverage
- Designed infra to support rapid model swaps
- Accepted operational complexity in exchange for flexibility
Builders who lagged:
- Overestimated the safety of vendor stability
- Discovered switching costs only after pricing or policy shifts
- Mistook API simplicity for long-term viability
While top-tier models are still pushing impressive benchmarking scores, it’s increasingly hard to justify 10x costs for ~15% improvement.
4. Bigger Context Windows Didn’t Fix What Was Broken
Context windows expanded dramatically. Reliability did not.
Mainstream production models moved from ~8k–32k tokens being “large” to 100k+ tokens being available.
Long-context variants crossed into ranges where entire documents, multi-file codebases, and even long chat histories could be included in a single call.
Larger context helped with summarization, retrieval breadth, and tool grounding — but it didn’t solve hallucinations, brittle reasoning, or poor data hygiene.
Builders who moved early:
- Treated context as a scarce resource
- Invested in retrieval quality and memory design
- Explicitly managed what models were allowed to “remember”
Builders who lagged:
- Stuffed prompts instead of fixing inputs
- Paid rising inference costs for marginal gains
- Masked data problems with larger windows
Context is infrastructure, not magic. Having higher context windows helps, but doesn’t solve the underlying problems already plaguing AI stacks.
5. Evaluation Started to Matter — Because Failure Got Expensive
As AI systems touched more users, silent failure stopped being tolerable. The market saw 95% of AI pilots failing to move into production because static benchmarks proved useless in production.
Teams began experimenting with task-specific, continuous, and human-in-the-loop evaluation.
Builders who moved early:
- Defined success in user-facing terms
- Measured regressions before customers reported them
- Used evals to guide system changes, not model bragging
Builders who lagged:
- Relied on offline scores disconnected from reality
- Learned about failures through support tickets
- Struggled to explain system behavior to customers
Most teams still don’t evaluate well and it’s showing in visible costs.
6. Multimodality Graduated from Demos to Workflows
Multimodal AI stopped being about “look what it can do” and started being about how people actually use it.
Image, video, and audio models increasingly lived inside pipelines to be chained, iterated, and guided by tools.
Builders who moved early:
- Designed for iteration, not single-shot output
- Optimized for consistency over novelty
- Accepted lower peak quality for higher controllability
Builders who lagged:
- Overbuilt around fragile demos
- Underestimated infra and bandwidth costs
- Struggled to operationalize creative workflows
Multimodality rewarded teams who thought like system designers, not demo artists. That isn’t to say there is no art in the creative process (there is), but that the tool needs to work before the art can be explored.
7. The Infrastructure Stack Fractured — Intentionally
The idea of a single, universal cloud stack lost credibility. Cost volatility, capacity constraints, and regional latency forced builders to design for heterogeneity across multi-cloud infrastructure.
Builders who moved early:
- Planned for portability and failover
- Treated hardware differences as design inputs
- Avoided single-vendor lock-in
Builders who lagged:
- Discovered constraints during scale, not before
- Faced painful migrations under time pressure
- Found infra choices limiting strategic options
Hyperscalers and larger clouds cashed in on incumbency to raise prices. Hyperscaler refugees seeing the writing on the wall fled to neocloud providers.
8. What Didn’t Happen Despite Expectations
Several widely predicted shifts failed to materialize at scale:
- Fully autonomous agents operating reliably
- General reasoning translating cleanly into products
- Human-free enterprise workflows
- Standardized tooling across the stack
Builders who recognized this early:
- Avoided premature automation bets
- Kept humans in critical loops
- Focused on augmentation, not replacement
Builders who didn’t:
- Built brittle systems on optimistic assumptions
- Overpromised capabilities
- Paid the cost in trust and churn
Restraint proved more valuable than ambition. As I’ve always said: “AI will happen slower than you want and faster than you like.”
9. What This Sets Up for Next Year
Taken together, these shifts point to a single consolidation:
- Inference constraints forced teams to confront cost and latency early
- Those constraints exposed brittle systems and vendor lock-in
- That pressure accelerated adoption of open models and portable infrastructure
- Which, in turn, made evaluation and reliability unavoidable
None of these changes happened in isolation: they are mutually reinforcing.
The result is a new dividing line:
- Builders who treated AI as a component — something you plug in and upgrade — increasingly hit ceilings.
- Builders who treated AI as infrastructure — something you design, stress-test, and operate — gained compounding advantages in speed, cost control, and reliability.
The Real Question Going Forward
As models continue to converge, novelty will decay faster than execution advantage.
The defining question for builders and founders next year is not “Which model should we bet on?” but “If intelligence is abundant, who builds systems that actually hold up under real users, real costs, and real time?”
The AI winners of 2026 will be those who can operate those systems under pressure.
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