Vercel Founder Guillermo Rauch: AI Will Ultimately Be Free
Vercel CEO Guillermo Rauch stated that AI will make everything free, including AI itself, with the last domino to fall being free energy, which is humanity's final frontier.
Rauch previously compared intelligence to tap water, claiming that models are "inexhaustible IQ machines." He cited an internal sandbox test: Kimi K3 would exhaust all means to escape the sandbox, a capability that previously would have cost millions to obtain from senior engineers, but now can be accessed by connecting a gateway and choosing any model.
Vercel evolved from Zeit, which he founded around 2015. He previously created Socket.IO and Next.js, and sold his first company Cloudup to Automattic, the parent company of WordPress. In September 2025, Vercel completed a $300 million financing round led by Accel and Singapore's sovereign fund GIC, with its valuation rising from $3.25 billion a year ago to $9.3 billion. Forbes estimates Rauch's net worth at least $2.1 billion.
The company has surpassed 1 billion application deployments, with Next.js downloads reaching 500 million in the past 12 months, exceeding the total from 2016 to 2024. Its infrastructure serves sites like OpenAI and The Weather Company, and its self-developed AI SDK is the second most downloaded package on npm after the openai package. By mid-2025, Fluid's Active CPU billing reduced Vercel's own bills by 77%.
Responses to the post focused on questioning two things: there is no zero-cost energy under thermodynamics; if AI is free, what remains of Vercel's hosting and billing?
The sellers are models and cloud vendors pushing the marginal cost of intelligence towards zero, while the buyers are applications and proxy developers increasing usage. This is narrative-driven rather than order-driven: funds still flow to computing power, electricity, and distribution entry points, putting pressure on model layer prices, while platforms controlling deployment, gateways, and electricity contracts benefit.
Source: Public Information
ABAB AI Insight
Guillermo Rauch's path is to first create protocols and then build platforms. Socket.IO solved real-time communication, Next.js standardized the building and deployment of React applications, and after selling Cloudup to Automattic, Zeit rebranded to Vercel, making frontend hosting the default cloud. The valuation jumped from $3.25 billion to $9.3 billion in 2025, not due to new models, but because of the increase in deployment frequency and usage duration following the explosion of AI applications.
Money is currently concentrated at both ends. On one end, capital like Accel and GIC provided Vercel with $300 million to expand the platform from page hosting to proxy infrastructure, firewall proxies, and AI SDKs. On the other end is the customer billing: Active CPU billing cut costs by 77%, superficially providing discounts, but actually shifting billing from idle duration to effective computing power, locking in migration traffic from pages to proxies and from HTTP to MCP. Leading sites like OpenAI run on top of this, with distribution rights being closer to cash than the models themselves.
This is similar to AWS's early free tier and Google's exchange of free search for ad inventory, and is akin to OpenAI and Anthropic continuously lowering prices to pass profits to the application layer. The industry has moved past the model showcase phase and entered a control phase: whoever controls the gateways, sandboxes, observability, and default deployments will capture the volume. Model companies compete on price, while platform companies compete on switching costs.
The essence is the transfer of pricing power. Once the marginal cost of intelligence is driven down by competition, prices will no longer stop at model outputs but will settle at electricity, chips, and scheduling. AI replaces human labor with energy consumption, and the cost formulas for manufacturing and software converge to electricity prices. Free intelligence will not eliminate charges; it will merely shift the charges from "per thousand tokens" to "per kilowatt-hour and per reliable invocation."
ABAB News · Cognitive Laws
- The free item is the commodity, while the charged item is the bottleneck.
- The day marginal costs reach zero is the day pricing power relocates.
- As intelligence becomes cheaper, electricity will become more expensive.