>It will honestly depend on just how much better the cloud versions are relative to the local versions.
'Better' has many meanings. Ultimately LLM performance depends not only on processor performance, but also on data. One could imagine real-time self-training, where the real-time availability of (allegedly anonymized) data from other users leads to a stable advantage over local LLM.
Another issue is deployment. Imagine this: You are a software developer using an LLM in your commercial product. You have two/three choices.
A) Call a cloud API using a simple cross-platform HTTP call. This will reliably work. While at it, you may gain useful data on your customers.
B) Include a local LLM, and deal with all the lovely deployment issues, especially when the guys running a 8th gen Intel laptop with an iGPU and 4GB memory call and ask why they can't run your product.
Perhaps there will be a third option:
C) Call a local API provided by the OS, which may or may not call a cloud API in the background.
One can see how even if the performance is totally equivalent, Cloud API may end up with an advantage.
IMHO, this is not a desirable future, but to avoid it we need to start by cutting down on the triumphalism.
[EDIT:
>If local LLMs reach 95% of what cloud versions can do, then I think local ones might win out because the cost will be smaller, it will be faster (in latency), and it will have more privacy.
Cost for whom? The local user will pay less if the call is remote. The cloud AIs can make up for their costs in data. Unfortunately, users often ignore their privacy.
]