Demand most likely won't drop due to Jevons and the worst will be big labs and Nvidia probably drop significantly in valuation but still pretty good. Also recent china results only show that you could build cheaper model hitting the benchmarks not actually generally competitive irl.
Agreed, with one caveat: demand for hardware can drop if the optimization is so substantial that deployed hardware is already capable of fulfilling any possible request in a timely fashion. Say, anyone becomes able to run any state-of-the-art model on any desktop computer. 90% is not enough, though. It has to be at least three or four orders of magnitude. The ones driving demand are big datacenters, so they need to be in a position where just throwing more hardware at the problem solves nothing.
