The New Business of AI (and How It's Different From Traditional Software) | Andreessen Horowitz

Weaker defensive moats due to the commoditization of AI models and challenges with data network effects.

However, we have noticed in many cases that AI companies simply don’t have the same economic construction as software businesses. At times, they can even look more like traditional services companies. In particular, many AI companies have:

Lower gross margins due to heavy cloud infrastructure usage and ongoing human support;