I agree with the whole first half, but I disagree that LLM usage is doomed to ad-filled shittyness. AI companies may be hemmoraging money, but that's because their product costs so much to run; it's not like they don't have revenue. The thing that will bring profitability isn't ads, it will be innovations that let current-gen-quality LLMs run at a fraction of the electricity and power cost.
Will some LLMs have ads? Sure, especially at a free tier. But I bet the option to pay $20/month for ad-free LLM usage will always be there.
Silicon will improve, but not fast enough to calm investors. And better silicon won't change the fact that the current zeitgeist is basically a word guessing game.
$20 month won't get you much, if you're paying above what it costs to run the "AI", and for what? Answers that are in the ballpark of suspicious and untrustworthy?
Maybe they just need to keep spending until all the people who can tell slop from actual knowledge are all dead and gone.