We're not gonna see significant model shrinkage until the money tap dries up. Between now and then, we'll see new benchmarks/evals that push the holes in model capabilities in cycles as they saturate each new round.
I think even with the money going in, there has to be some revenue supporting that development somewhere. And users are now looking at the cost. I have been using Anthropic Max for most of this year after checking out some of these other models, it is clearly overpriced (I would also say their moat of Claude Code has been breached). And Anthropic's API pricing is completely crazy when you use some of the paradigms that they suggest (agents/commands/etc) i.e. token usage is going up so efficient models are driving growth.
I'm not sure about that. Microsoft has been doing great work on "1-bit" LLMs, and dropping the memory requirements would significantly cut down on operating costs for the frontier players.