# Joachim Klement says small on-device language models could make cloud AI unprofitable

> Original title: What Happens when LLMs get Smaller and On-Device?

- Source: AI Supremacy
- Published: 2026-11-10T10:22:15.000Z
- Bad Influence: https://badinfluence.news/items/k043k5a9f0j3wihbwym5vx2tz
- Original: https://www.ai-supremacy.com/p/what-happens-when-llms-get-smaller-ai-bubble-capex-mean-reversion

## Summary

Investment strategist Joachim Klement argues that small language models running on local PCs and phones will replace large cloud models, making hyperscalers' data-centre spending unprofitable. He says the AI bubble will burst in 2027 or 2028 and that the S&P 500 could fall to about 5,000 by end-2027, from about 7,500. He cites a May Stanford study comparing SLMs such as Qwen 3 and Gemma 3 with cloud models including ChatGPT 5 and Claude Sonnet 4.5.