For years, the AI race followed a simple formula: performance was a function of parameters, data, and compute. Add more GPUs, feed in more tokens, expand the model size, and performance climbed. That law is breaking. We are entering a new scaling regime where the old formula no longer captures the real drivers of capability.
The fourth scaling phase isn’t speculation – it’s being actively engineered across frontier AI labs. The way modern AI systems handle working memory, token management, and extended thinking represents a fundamental shift from raw parameter scaling to architectural intelligence.
The addition of two terms – Memory and Context – may look subtle. The implications are profound. They signal that AI capability now depends less on raw size and more on architectural coherence.
The Four Phases
Phase 1: Pre-Training Scaling (2018-2023) – “System 1 Thinking.” Fast, pattern-based intelligence. Double the parameters, observe consistent capability gains. The constraint: diminishing returns by 2023, with incremental gains of just 0.5-1%.
Phase 2: Post-Training Scaling (2023-2024) – “System 2 Emergence.” RLHF, Constitutional AI, fine-tuning on curated datasets. The constraint: improvements bounded by base model capacity.
Phase 3: Test-Time Scaling (2024-2025) – “Deep Thinking.” Models like o1 reason through problems step-by-step at inference time. The constraint: extended thinking consumes context windows rapidly.
Phase 4: Context + Memory Scaling (2025+) – “Persistent Intelligence.” The shift from models that process inputs to agents that maintain operational state across sessions.
Key Takeaway
As AI infrastructure analysis shows, the companies that solve architectural coherence elegantly – making constraints feel invisible while maintaining reliability – will capture disproportionate value in the next AI era.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
