There is drastically more power and profit in the software ultimately.

Apple is in the software first, the hardware second. Everyone at Apple has been trained to understand this for decades, and Jobs pointed it out endlessly. Apple's real moat is software (services, iOS, experience, MacOS).

Windows, Office, Azure, et al. Microsoft accumulated approximately one zillion dollars in profit on the back of software. It's a vastly superior business to anything hardware has traditionally seen. Nvidia is the first true juggernaut hardware profit machine, and the AI boom in extended hardware (RAM, storage) will prove temporary (even if there is a feast during that time). Microsoft's advantage and moat was Windows-Office for decades. It was a far better business than Intel's chip biz.

Google is a software company first. Every aspect of what made them and maintains them is software first, hardware second. They're a $400 billion software company. Their ad machine is software. Search is software.

Facebook is software. Instagram is software. WhatsApp is software. A $200 billion software company. They're not selling hardware, they're selling ads via software, they're monetizing users that use their software.

AWS is at least half software as an entity in terms of complexity, competitive advantage, et al. That's a two trillion dollar business.

LLMs can run successfully with various hardware approaches. The software is the value at the end of this, regardless of the hardware under it. The sole exception so far that may be sustainable is Nvidia, and we'll see if the bottom falls out from under that margin monster (China, specialized AI chips, whatever it happens to be that cuts under them massively).

Hardware always gets its margin squeezed eventually because it's a manufactured good (with inventory, fabs, etc). Software is hyper margin by default, you have to layer a lot of garbage on top of it to kill the margin. Nvidia is 33 years old, they have had a rich business for three years, that's it.

The AI boom is the sole reason anything in hardware has looked great in the past 20 years. Check the margins & op income for the top 20 hardware companies, from TI to AMD to Intel to Nvidia to Micron to Sandisk to Samsung to TSMC to ASML, prior to the AI boom of the past couple years. It won't last indefinitely. And after the return to a more normal environment happens, the hyper margins in software will persist.