By Nick Kolakowski – Earlier this year, two partners at prominent venture-capital firm Andreessen Horowitz published an interesting blog post about artificial intelligence (A.I.). Specifically, is A.I. (and by extension, machine learning) capable of powering a sustainable business? Or is the tech industry infatuated with a technology that’s just a lot of empty hype?

It’s a worthy question as we close out 2020, considering how much money and resources companies are pouring into all things A.I.-related (often despite budget cutbacks related to the COVID-19 pandemic). Martin Casado and Matt Bornstein, the partners in question, conclude that A.I. is indeed viable—but that A.I.-centric businesses can’t operate like traditional software firms.

Specifically, A.I. companies have “lower gross margins” (due to the need for lots of expensive and talented humans, as well as infrastructure expenses), “scaling challenges” (due to edge cases), and “weaker defensive moats” (because of more A.I. tools and apps becoming commoditized, among other issues).

“Training a single A.I. model can cost hundreds of thousands of dollars (or more) in compute resources,” they wrote. “While it’s tempting to treat this as a one-time cost, retraining is increasingly recognized as an ongoing cost, since the data that feeds AI models tends to change over time (a phenomenon known as ‘data drift’).” Read On: