I get worried when thinking about Mistral because they make mediocre models and I don't think they will be able to defeat their competition.
I get worried when thinking about Mistral because they make mediocre models and I don't think they will be able to defeat their competition.
That may be true, but there's a non zero chance that frontier AI becomes a controlled export, and that 'local' production becomes a prudent play.
Highly improbable given China is ready to pick up any slack.
That's true now, but given the strategic importance of AI to nation states and the fractious relationship many have with China, I wouldn't expect the eagerness to use Chinese AI to continue indefinitely.
Same here. And I doubt 3B EUR will do anything (remember the >$100B investment round that OpenAI got?)
In the EU it seems we are very much at risk of being cut off from frontier AI if the US government should decide to do so.
OpenAI also indirectly depends on ASML, but sadly Europe seems too cowardly to leverage this dependency at the moment.
If EU were to "leverage" ASML, and that would require rather unlikely approval of Netherlands, it wouldn't end very well.
Already shipped machines can not be taken back, nor can they be stopped. Sure, you can cut the support, and buildup of new fabs will be stalled. But the other side, Chinese or USA, has many more levers to pull. Raw materials, energy (LNG), was majority of consumer goods, solar panels, batteries, semiconductors. EU doesn't mine or make most of them, and isn't nowhere close to even starting, instead, industrial base is already shrinking.
Even worse, ASML may dominate EUV, but other suppliers do very well in DUV. The moment ASML becomes unreliable, all of them will get infusion of money, as they become national security issue.
What about ASML subsidiaries in USA, like Cymer and ASML Wilton, will they take the bullet for the parent? Or will they become part of new competitor, with all the knowhow.
And China has already set domestic capacities in this area as a national priority.
Blocking EU from those services would crash the valuation of US AI companies, so I'm not expecting it to happen.
You'd still have access to the Chinese models though right? Even if you want to argue they aren't truly SOTA they're still pretty dang good.
Maybe true for frontier LLM, but there's plenty of space in the niches. For example, I think their TTS/STT models are pretty good, speaking from personal experience.
Is there money in niche models?
Is there money in frontier?
Yes...?
Is that not self evident by the insane revenue from frontier labs?
Sure, there is revenue, and market valuation. Is there _profits_ in frontier models ?
What is the horizon for openai and anthropic to _make_ money ? Will they achieve that by charging more for frontier models, or investing slightly less in training frontier models, etc... ?
Revenue is not profit.
https://isaiprofitable.com/
AI is profitable. Gross margins are high.
The only reason OpenAI and Anthropic are making a loss is due to training new models to keep up with competition - not because the industry is flawed in terms of business model.
Keeping up with competition is part of trying to stay in the frontier. If they stop training the profit disappears in a few months.
The point is that the model is already immensely profitable. There is no fundamental reason why AI isn't profitable. It already is.
Insane competition does not last forever. When chip manufacturing first started, there were dozens of companies that had fabs that made compute chips. Nowadays, only TSMC is viable. Samsung and Intel survived because of geopolitics.
Lol that chart is hilarious when you look at Nvidia.
Always sell shovels in a gold rush I guess
> Is that not self evident by the insane revenue from frontier labs?
No...? Of course not?
Because revenue is only one side of the equation. Did you ever look at total cumulative OPEX and CAPEX, and how long it will take them to even just break even at current growth?
Anthropic is growing 10x revenue every year.
They're likely over $80b ARR by now. They'll be at $800b ARR next year at the same rate. Let's say their growth gets cut down to 3x instead of 10x - that's still $240b ARR by this time next year.
When you are growing so fast, you don't need to make a net profit. You just need to make sure your unit economics are good - which it seems like they are given reports that their gross margins are at 60-70%.
> They're likely over $80b ARR by now. They'll be at $800b ARR next year at the same rate.
And they will be 800 trilion ARR in a couple of years, following that same rate! 8 quadrillion by 2029!
> When you are growing so fast, you don't need to make a net profit. You just need to make sure your unit economics are good - which it seems like they are given reports that their gross margins are at 60-70%.
If their margins were anywhere near this good, they wouldn't need to raise so much money so often.
If you create a machine that turns 1 dollar into 3 dollars, you don't dillute your ownership of the machine, you use your fabulous profits to expand your machine's capabilities.
Or they bleed money like crazy, and their margins are pretty awful. Which is the correct answer.
Your $200 subscription is a major net loss for them. The vast majority that pays for that would cancel in a heartbeat the moment they had to pay API prices. Which may or may not be profitable, I am not entirely sure. But for the sake of argument, let's assume that it is.
They’re in the EU. If they are a year or so behind and things start to plateau they’ll catch up. Americans perhaps don’t realize we can also tariff their digital goods to protect our own. There is a scenario where Americans and Chinese foot the bill and EU gets out cheap, e.g. similar to the Apple approach to AI.