Those developer quotes are tough to read. Rate limits are going to hit like a truck when the labs eventually need to make a profit.
Those developer quotes are tough to read. Rate limits are going to hit like a truck when the labs eventually need to make a profit.
At this point the AI labs would pretty much have to form an illegal price fixing cartel in order to jack the prices up, they've been competing to drive down prices for so long.
They'd have to get the Chinese AI labs to go along with that price fixing too.
You don't need collusion, just the VC money drying up. Economic reality will set the base price.
Why would vc money dry up?
There's only so much of it to spend before they run out.
I don't pretend to have detailed domain knowledge here, I may have seen other people's GenAI output rather than reality*, but the numbers people are throwing around for this stuff sum to trillions of USD, slightly higher than other (same caveat, perhaps also GenAI output*) claims I've seen about the total supply of money in the global venture capital markets.
* I miss the days when I could make a decent guess as to which websites were reliable and which were BS
They’d have an entire country of geniuses prepared to defend against the antitrust allegations, who’s to stop them? /s
For the thousandth time - they. make. a. profit. Inference margin is over 60%, today.
They are spending that money training ever-larger models, so they are cashflow negative, but under almost any sane GAAP treatment that does not allow one to write down all R&D upfront (capital costs of model training), they are profitable.
Should this matter to you? Only if you're making financial decisions that assume that somehow one day the "jig will be up" - i.e. please don't short these stocks when they float, or at least do so very judiciously.
It always makes me laugh when people say this, because its so utterly pointless. That percentage assumes literally no other costs exist besides the direct inference cost.
Even if they quit trying to make better models today, there are a mountain of recurring costs that will never go away. Retraining the models with new data, replacing/upgrading old hardware, enormous infrastructure costs related to maintaining the actual platforms, data collection costs, payroll...
I'm not aware of a single player in the LLM space actually turning a profit, even if they're only providing inference.
Anthropic.
Listen carefully to Dario’s public statements; you could just pull his most recent Dwarkesh interview for example - worth a listen in any event.
He is guilty of an engineer’s use of the word profit when he says “we never made a profit.” But he always follows up with the real story — “every model we trained has returned 2-4x in free cashflow, counting R&D and inference”
You could say “the industry is engaged in possibly ruinous competition training ever-larger models and sucking cash to do so, and in fact if anyone stops, they’ll lose forever” and those statements might be true, but to be clear the fact that these companies are posting a loss right now is a FEATURE of how R&D works, one that lets them spend more on a race. It’s not tied to the sort of financial reality accrual accounting is designed to talk about.
How do you reconcile this with Ed Zitron's reporting that just the AWS bill in 2024/2025 was more than their entire revenue?
https://www.wheresyoured.at/costs/#how-much-did-anthropic-an...
While true, the obvious counterpoint is that open-weight models exist, that high-end desktops can run them, that said hardware doesn't yet appear to have reached the end of the road for improvements to both purchase and operational costs, and that even if it had the moment people stop having VC money to constantly churn expensive training runs for new models it suddenly makes sense to etch the weights of whatever is SOTA at that point onto a silicon wafer and run it as a much more efficient hardware circuit without wasting the overhead that comes with software doing the same thing on general-purpose hardware.
Even if the bubble burst while I was writing this comment, even if every single current LLM provider goes the way of pets.com, AltaVista, and GeoCities, that can all happen without ending vibe coding.
Keep in mind that they make large profit on inference. Not enough to make up for losses on training but it won’t be a problem for Chinese labs which will just steal their weights.
Given that they built their businesses on wide spread copyright infringement and licence violations, I couldn't give less of a shit about people turning around and "stealing" from them