The State of Physical AI

The software era was defined by a single elegant principle: marginal cost approaches zero. Copy software once, distribute infinitely. Build a platform, add users for nearly nothing.

The economics of bits — frictionless, weightless, borderless — produced the largest wealth creation in history and the defining ideology of two generations of technologists.

AI breaks this principle at the frontier. Not everywhere, not forever, but right now, at the capability level that matters — the intelligence is not weightless. The machine that produces it is not frictionless. The infrastructure — as explored in the economics of AI compute infrastructure — underneath it does not scale like software. It scales like steel.

This is the inversion that has not been fully absorbed. Everyone can see that AI is expensive.