The AI Dividend: Why 2025 Will Be The Year of Killer Apps

When the Cold War ended, President Bush (senior) used to talk about the peace dividend, the downstream economic benefit of reductions in defense spending.

Over 10 years ago, I wrote that the Cloud Dividend would yield similar benefits--and boy did that prediction prove right. The plummeting cost of cloud computing has resulted in a flourishing of innovation and a transformation of business operations large and small. A 2021 Gartner report found that enterprises adopting public cloud services could lower their total cost of ownership for IT infrastructure by an average of 30% to 50%. And the benefits of the cloud dividend have not just been costs, but also dramatically increased capabilities. As a result, companies are more agile and efficient and consumers have access to extraordinarily innovative services (e.g., Netflix, Uber, telemedicine, and collaboration platforms to name a few). Established businesses and startups alike have benefited tremendously.

We are seeing history repeat itself with the advent of what I call the AI Dividend. Thanks to the billions of dollars of invested capital in AI infrastructure and capabilities, 2025 will be the year of killer AI apps. The chart above, provided by angel investor Elad Gil and his colleague David Song , shows that the cost of 1 million tokens (a good benchmark for the cost of AI intelligence) has dropped 240x from $180 to $0.75 in ~ 18 months. Since Gil and Song published this a few quarters ago, AI costs dropped even more. Our portfolio company, Arcee, is one of the leaders in a growing trend of model merging and small language model architectures to help lower the total cost of ownership. Fast forward another 5 years and the cost of AI intelligence is going to be ridiculously low, just as cloud capabilities are today.

Lower platform costs bring a surge in innovation at the application layer. We saw this with Web 1.0, mobile, and the cloud, and we can see it coming as clearly as day in the world of AI apps. At Flybridge , we couldn't be more excited to see the world reap the benefits of this new AI Dividend. Early versions of tomorrow's killer apps are among us today and are being hardened and battle-tested in the market. In a few years, these apps will become mainstream and we will wonder how we lived without them.

The first group to cash in this AI Dividend will be founders. Startups have no entrenched processes or bureaucracies to navigate. They can embrace new processes and adopt new applications without waiting for their existing vendors to deliver AI capabilities. If existing market leaders don't quickly embrace AI experimentation, they will be disrupted. That's another historical pattern that has played out time and time again.

If you want to read more about how business leaders can become "10x leaders" (10x founders, 10x joiners, 10x analysts, etc) in the age of AI, read my new book The Experimentation Machine: Finding Product-Market Fit in the Age of AI.