FHE is the future of AI. I predict local models with encrypted weights will become the norm. Both privacy preserving (insofar as anything on our devices can be) and locked down to prevent misuse. It may not be pretty but I think this is where we will end up.
If you're interested in "private AI", see Confer [0] by Moxie Marlinspike, the founder of Signal private messaging app. They go into more detail in their blog. [1]
[0] https://confer.to/
[1] https://confer.to/blog/2025/12/confessions-to-a-data-lake/