Small language models are the future of agentic AI

IMO, the paper commits an omission that undermines the thesis quite a bit: context window limitations are mentioned only once in passing (unless I missed something) and then completely ignored throughout the analysis of SLM suitability for agentic systems.

This is not a minor oversight - it's arguably, in my experience, the most prohibitive technical barrier to this vision. Consider the actual context requirements of modern agentic systems:

    - Claude 4 Sonnet's system prompt alone is reportedly roughly 25k tokens for the behavioral instructions and instructions for tool use
    - A typical coding agent needs: system instructions, tool definitions, current file context, broader context of the project it's working in. Additionally, you might also want to pull in documentation for any frameworks or API specs.
    - You're already at 5-10k tokens of "meta" content before any actual work begins

Most SLM that can run on consumer hardware are capped at 32k or 128k contexts architecturally, but depending on what you consider a "common consumer electronic device" you'll never be able to make use of that window if you want inference at reasonable inference speeds. A 7b or 8b Model like DeepSeek-R1-Distill or Salesforce xLAM-2-8b would take 8GB of VRAM at Q4_K_M Quant with Q8_0 K/V cache at 128k context. IMO, that's not just simple consumer hardware in the sense of the broad computing market, it's enthusiast gaming hardware. Not to mention that performance degrades significantly before hitting those limits.

The "context rot" phenomenon is real: as the ratio of instructional/tool content to actual tasks content increases, models become increasingly confused, hallucinate non-existent tools or forget earlier context. If you have worked with these smaller models, you'll have experienced this firsthand - and big models like o3 or Claude 3.7/4 are not above that either.

Beyond context limitations, the paper's economic efficiency claims simply fall apart under system-level analysis. The authors present simplistic FLOP comparisons while ignoring critical inefficiencies:

    - Retry tax: An LLM completing a complex task with 90% success rate might very well become 3 or 4 attempts at task completion for an SLM, each with full orchestration overhead
    - Task decomposition overhead: Splitting a task that an LLM might be able to complete in one call into five SLM sub-tasks means 5x context setup, inter-task communication costs, and multiplicative error rates
    - Infrastructure efficiency: Modern datacenters achieve PUE ratios near 1.1 with liquid cooling and >90% GPU utilization through batching. Consumer hardware? Gaming GPUS at 5-10% utilization, residential HVAC never designed for sustained compute, and 80-85% power conversion efficiency per device.

When you account for failed attempts, orchestration overhead and infrastructure efficiency, many "economical" SLM deployments likely consume more total energy than centralized LLM inference. It's telling that NVIDIA Research, with deep access to both datacenter and consumer GPU performance data, provides no actual system-level efficiency analysis.

For a paper positioning itself as a comprehensive analysis of SLM viability in agentic systems, sidestepping both context limitations and true system economics while making sweeping efficiency claims feels intellectually dishonest. Though, perhaps I shouldn't be surprised that NVIDIA Research concludes that running language models on both server and consumer hardware represents the optimal path forward.