MechanismArticle

Tokens are not a commodity, since different models need different amounts of tokens to reach a correct answer; what is actually fungible is the intelligence (the correct answer) that tokens produce, not the tokens themselves.

Thompson argues against Nvidia's 'token factory' framing, contending intelligence (correct outputs), not raw tokens, is the true fungible commodity, since models vary widely in tokens needed per answer. ✦ AI generated

Ben Thompson · Stratechery · 2026-07-20 · original ↗

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A token from one model, however, is not the same as a token from another model. What is fungible is what is constructed from tokens, which is to say intelligence. In other words, if both Kimi and Sol generated the right answer, then that answer is fungible; the difference in tokens generated to get to that right answer is a contributor to a difference in COGS.

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▦ Nvidia ◉ Jensen Huang

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Evidence · 2

Frontier AI models are capturing the vast majority of economic value even though open-source models may account for the majority of raw tokens consumed.Gavin Baker · BG2 Pod · conf 60%Frontier AI models capture the vast majority of economic value even though open-source models may account for the majority of tokens consumed worldwide.Gavin Baker · BG2 Pod · conf 60%

In practice · 2

Extends · 1

As intelligence becomes commoditized, Anthropic and OpenAI will be fine because they already have among the lowest costs per unit of frontier-quality intelligence, and being on the frontier positions a lab to dominate non-frontier markets as well.Ben Thompson · Stratechery · conf 65%

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supports → Marginal costs are back in a big way for AI, both in the short-term implications of state-of-the-art free/cheap models and in the long-term structure of the industry.Ben Thompson · Stratechery