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How does one justify this valuation in a world DeepSeek and Qwen are free?
by buyucu 2y ago
How does one justify this valuation in a world DeepSeek and Qwen are free?
- somanyphotons 2y agoAt any point the open models could fall behind new closed offerings
- tylersmith 2y agoThey've always been behind. They're closer than ever but still miles away from Claude's code abilities.
- mechagodzilla 2y agoBut the open models create a (rapidly rising!) 'floor' - models that are worse/less capable than the best open-weight models effectively have zero economic value to their creators, even if they just spent $10B to create them. What fraction of queries require a better-than-R1 answer? Every time that floor rises, it puts even more pressure on whatever narrow, temporary advantage these closed companies can achieve to actually justify the valuations.
- nilkn 2y agoI think for at least the next several years at minimum we’re going to see people continuing to integrate large language models more deeply into more aspects of their workflow. Many people will become used to what’s only possible with the absolute best and will simply lose interest in second rate models. I have no doubt that at some point this process will stabilize, but we’re definitely not close to that point yet.
- ndiddy 2y agoThe problem I see is that all the current AI leaders are spending way more than their revenue in training costs to stay ahead of the open source models. As an example, in 2024 Anthropic made $908 million in revenue, but spent $5.6 billion on training. If they cut down on training costs to become profitable, it would only take a year or two before open source models outperformed Anthropic's models, essentially making them worthless. With this in mind, I don't see how it's possible for Anthropic to generate a return on investment.
- somanyphotons 2y agoI don't see how it's possible for the open models to continue to get better without similar levels of extreme money expenditure on training hw. Someone is paying
- lanstin 2y agoAll the interesting benefits of LLM/generative AI grow exponentially with the intelligence of the model. There's no point in a 90% capable model, except something like replacing phone trees or extremely bad customer service. A model that is 50% less likely to try to prove false theorems tho is much more useful than than one that happily tries. I'm not sure that HN folks appreciate this, but making commercial software is way easier than math and science (all the evidence you need, except the experience of understand QFT or advanced mathematics) is found in HN itself.
- buyucu 2y agolikewise closed offerings could also fall behind open models. No matter who you are, the rest of the world combined will always be bigger. That is why Linux won the cloud, and why Windows server simply could not compete.
- tsujamin 2y agoBy lobbying for government-bans on foreign models? /s
- deadbabe 2y agoNot investing and being wrong will hurt a lot more.
- mechagodzilla 2y agoAnd the Llama series, and they have half a dozen closed competitors with similar performance/capability. It really seems impossible to justify these evaluations from any kind of economic perspective.
- buyucu 2y agoLlama was great because it showed that open LMs can be competitive. But today Llama is simply not in the top league anymore.
- ChadNauseam 2y agoClaude is simply much better. Additionally, since it’s possible to train on synthetic data from other LLMs, it’s easier to catch up to competitors than it is to surpass them
- bugglebeetle 2y agoI would say “for now” and that Anthropic’s inability to execute (3.7 was only released in response to competition from DeepSeek) raises a lot of questions about their future. While I agree that DeepSeek is still behind, Anthropic also does not have the same caliber of ambitious talent that DeepSeek has and has become a magnet for safety-obsessed cranks, whom (in total) act as a drag on the company. That Dario has also been engaging in dull-minded saber rattling about China does not speak well about their ability to deliver (vs. posture) in the future.
- deleted 2y ago[deleted]
- _t9ow 2y ago> has become a magnet for safety-obsessed cranks I'm out of the loop. To whom are you referring?
- rvz 2y ago> "Claude is simply much better." Until lots of free AI models close the gap again. It is simply not good enough for such valuations like this for Anthropic. Any other valuation higher than 70B for Anthropic is really overvalued and such higher valuations are always defended by those who invested in it already.
- Karrot_Kream 2y agoA few friends and I run Deepseek (and other LLMs) on some hardware we jointly own and offer endpoints to each other via VPN. Deepseek is a big step forward for open LLMs and is something I use when writing scripts that process lots of data because we've all split the capital to build the machine, but Claude was and still is a lot better than Deepseek in the kinds of day-to-day usage that I'm after. And with how cheap Gemini 2.0 is, I find myself considering whether to use my local LLMs even for data analysis. I realize that on benchmarks it appears R1 is very close to Sonnet 3.7, but in practice I use Sonnet 3.7 much more.
- ein0p 2y agoDeepseek and Qwen are in China, that's how. If you look at non-US asset prices, the only conclusion is either they are massively underpriced, or US assets are massively overpriced. You have industrial giants (with revenues and profits to match) with valuations smaller than a permanent negative profit silicon valley startup.
- buyucu 2y agoI have DeepSeek and Qwen running on my laptop and home server. I'm pretty sure neither my laptop nor my home server are in China.
- ein0p 2y agoAnd so do I (except in my case they're running on a GPU server in my garage), so I'm not saying they are. I mean the teams behind the LLMs, not the LLMs themselves. That's what the investment really goes into (+capex/opex, of course; without it those teams can't really do anything). The current versions LLMs will be outdated within 6 months, their value is fleeting.
- psychlops 2y agoI'd invest large amounts of other people's money into it too.
- tylersmith 2y agoNo free models are even in the same class as Claude when it comes to code. Investors are clearly confident that moat won't be crossed soon.
- BeetleB 2y agoAccording to Aider's leaderboards, R1 is not that far behind Sonnet (without thinking): 56.9% vs 60.4% Sonnet with thinking is at 64.9% (the top), but it's pricey - about double the cost without thinking. https://aider.chat/docs/leaderboards/ https://aider.chat/docs/leaderboards/
- buyucu 2y agoIn my experience DeepSeek is far better than Claude for coding.
- ttoinou 2y agoIf it’s 20% better it can still be worth 10x more
- elicksaur 2y agoHow does Microsoft justify a $3T valuation in a world where Linux is free?
- rendang 2y agoWindows can't be even 1 of those 3T by itself right?
- outside1234 2y agoBy running Linux in their cloud
- asah 2y agoOnce a government or company adopts Microsoft (and 95+% have), it's *very* difficult to migrate, allowing Microsoft to charge whatever they want and force you to buy other products, including Azure.
- jjcob 2y agoAt a non-profit that I contribute to we recently switched everything to Microsoft because it was the easiest way for ~10 people with varying backgrounds to collaborate, when you have only a part time technical person who has limited time to set everything up. Costs a bit of money, but dealing with Google Docs, Synology, Dropbox, email and web hosting providers took so much effort. Setting up Sharepoint etc. isn't trivial either but at least it's a standard setup that you'll always find someone who can manage it.
- stackskipton 2y agoMicrosoft valuation is high but they have clear profitable products. Most people going, “these valuation are insane” because these AI companies are not profitable and doesn’t seem to be a clear path to profitability.
- vdfs 2y agoI think they need a lot of money to build AGI, then ask it how to be profitable. That's what OpenAI head said in an intreview
- nilkn 2y agoCompany valuations don’t just take into account the current state, but also projections of the future state. Anthropic has a reputation of consistently being right on the cutting edge. Their products continue to get better and better and gain more and more traction across more and more use cases, even in the face of competition. This valuation simply reflects that investors believe these trends will continue. Another way of thinking about this is that this is increasingly an industry where creating one good model just isn’t enough. Just as important, if not more important, is the ability of the company to repeatedly and consistently match or exceed everyone else while responding in a very smart and nimble manner to constantly evolving market pressures. Regarding DeepSeek specifically, it’s a fantastic open model, but the incumbents have already surpassed it in almost every way, and are continuing to blaze ahead. Frankly, it’s old news already as far as the absolute frontier and pinnacle are concerned. And that’s where all the money is.