4 ms·

Typically tech companies that end up with fat profits are near-monopolies with dominance in market share or with moats on their expense side, like Apple's verti

Typically tech companies that end up with fat profits are near-monopolies with dominance in market share or with moats on their expense side, like Apple's vertical integration or Amazon's logistic network. What's the scenario look like where multiple LLM providers like Anthropic and OpenAI both live up to their valuations? Claude being 1.1x better at code and OpenAI 1.1x better at some other stuff doesn't seem like enough differentiation to do it.

outside1234 2y ago
Also feels like we are just waiting for someone to swoop in with a open source model like DeepSeek that wipes both of them out.
- sour-taste 2y ago
  Shouldn't deepseek have done that already?
  - rtkwe 2y ago
    There's a lot of money riding on their being a lot of headroom left on LLM performance and usefulness. I personally have my doubts you can get their with the Chinese Room model of LLMs but that's where all the money and hype is riding.
  - keithwhor 2y ago
    DeepSeek V3 is easily the best cost / performance non-reasoning model on the market but accessing it via API is not straightforward -- at least for people who want their model hosted in the US. For the layperson OpenAI / Anthropic are much more accessible. Some of OpenRouter's [0][1] providers seem bunk; their version is corrupted. Occasionally just get mangled outputs. Fireworks [2] is my best experience so far: their serverless API, haven't messed with custom deployments. Fast, performant, better than other models in its size category and less expensive. [0] https://openrouter.ai/deepseek/deepseek-chat:free https://openrouter.ai/deepseek/deepseek-chat:free [1] https://openrouter.ai/deepseek/deepseek-chat https://openrouter.ai/deepseek/deepseek-chat [2] https://fireworks.ai/models/fireworks/deepseek-v3 https://fireworks.ai/models/fireworks/deepseek-v3
- AustinDev 2y ago
  QwQ 32B has replaced Sonnet 3.7 for me for quick hack apps I write like. 'Service that converts youtube tutorial videos into step by step instructions with timestamp references for each step.' And I can run it locally!
  - dchuk 2y ago
    Are you chatting with it directly or using it with a coding tool or IDE?
  - radlad 2y ago
    For whatever reason, qwq on a Macbook under ollama & Open Web UI seems to often "stall out" for me. It just never reports it even started to answer. Have you experienced this at all? I don't have this issue with qwen2.5-coder, deepseek, etc.
- whiplash451 2y ago
  The product is much more than the model. Our hacker community is not a good proxy for the overall userbase.
  - rowanseymour 2y ago
    Ok but where is the product? Aren't most people just using ChatGPT from a chat prompt like they can do with any other LLM?
    - deleted 2y ago
      [deleted]
xyzzy9563 2y ago
I think the way it works is that if the multiple providers get swamped by enough demand, it still drives up their profits and margins despite the existence of competitors. Similar things happen with cloud providers I think.
nerdponx 2y ago
> What's the scenario look like where multiple LLM providers like Anthropic and OpenAI both live up to their valuations? Protectionism by the US federal government.
- mkolodny 2y ago
  The same government where the head of the department of efficiency is also the owner of Anthropic’s and OpenAI’s competitor, xAI?
dmix 2y ago
Oligopolies often exist in the same general categories by serving different submarkets (regions, business vs consumer, large vs small business, specialization, etc). Especially when it's the category is just a technology, like databases with Oracle vs the many db vendors/services. If LLM's technically plateau then it's all about who can find those high $$ markets (coding, consumer chat, phone integrations).
blindriver 2y ago
It's not functionality. It's access to content. The real target is replacing search with AI, as well as locking up all content creators into exclusive deals so that other LLMs don't get access to the new data. Just like how streaming has locked video content under different vendors, LLMs will split information across multiple vendors and we will need to get subscriptions to different companies in order to search things in the future. And it's going to cost a lot of money for us peons to get access to data in the future.
- mi_lk 2y ago
  And what do they have to compete with Google on content access?
  - mannycalavera42 2y ago
    better knowledge reach, the biggest search intent goal
- xmprt 2y ago
  > locking up all content creators into exclusive deals This is the worrying part. The real content creators are people like you or me (not reddit or stackoverflow) and we aren't getting a piece of the exclusive deals. So if this is the end game, then it means either exploiting real people who are writing things or that people stop using it and the internet uses a lot of its utility as a place for communication and shared knowledge; probably a bit of both
- deleted 2y ago
  [deleted]
- fourside 2y ago
  > locking up all content creators into exclusive deals so that other LLMs don't get access to the new data It seems like most (all?) foundational models were trained on stolen content. I’m not sure what content exclusivity looks like for LLMs. It’s not like Joe Rogan signing on with Spotify where they have exclusive distribution rights for a particular piece of content.
alex_abt 2y ago
The profit margin will come from government contracts. It's the Azure/AWS business model.
ibejoeb 2y ago
Anthropic is ahead of the game on the applied technology side. Claude code is pretty good. It feels like a product from the early PC days. There's so much further to go, and so many other verticals to get into.
swatcoder 2y ago
There doesn't need to be any such scenario, and there almost certainly isn't one. NewHype valuations reflect how confident current investors are that later investors are still coming and have nothing to do with specific profit models. Maybe the hype will pay off or maybe it won't, but during this phase all I need to believe is that I can get out before the tide turns. At this point, the carrot that keeps investors coming is that many many people still believe at least one of these companies will become the next IBM/Microsoft/Apple/Google in one way or another and we don't know which one yet. It's just buying tradable bets on a horse race that won't see its end for several more years. One horse could win, all the horses could drop dead, and none of it matters today: the game is in deftly trading those betting tickets as the odds shift.
- throwup238 2y ago
  This is the best take here. We’re in gold rush mode, everybody thinks there’s gold there and that the potential reward is worth the risk, even knowing that there’s a significant chance that their claim won’t find enough gold to make the investment worth it.
- lawn 2y ago
  Also called "selling to the greater fool", which has fueled bubbles for as long as we've recorded bubbles.
- pj_mukh 2y ago
  OR, the pie is big enough that a monopoly isn't required. The effect on the economy is so large that all of these companies become money printing machines. I personally don't think this is possible unless these AI Companies translate from just bits to atoms but that's not out of the question[1]. [1]: https://venturebeat.com/ai/openai-has-begun-building-out-its-robotics-team/ https://venturebeat.com/ai/openai-has-begun-building-out-its...
- TechDebtDevin 2y ago
  With 8 billion being their largest investor being Amazon, who has proclaimed they're going to spend 100bb on similar investments, these valuations and investment sizes, aren't even large relative to the investor's bankroll.
FloorEgg 2y ago
The answer to this question that I almost never see come up in these threads has nothing to do with moat or typical startup dynamics, it has to do with macro policy and theoretical economics. Our economic system is set up to continuously increase the supply of money at a rate that results in the average price of things consumers buy increasing 2% a year. Technology is a deflationary force and if our system wasn't constantly adding more money the price of almost all consumption goods would continuously fall. These investors are banking on the idea that these companies will automate so much high value labour that there is a massive wave of deflationary pressure on the economy, resulting in massive increases to the supply of money to balance it out. So by crude example; 10 years from now anthropic could end up with 1% market share and be worth $10 trillion.
dcdc123 2y ago
I use agentic tooling when programming all the time and I can say for certain that Claude feels _several times better_ than any OpenAI model, despite what the benchmarks show.
- dimitri-vs 2y ago
  Hot take: sonnet3.7 is as good if not better than OpenAIs $200/mon o1-pro model, were it were not for Deep Research I would have cancelled my ChatGPT subscription.
superfrank 2y ago
I've been thinking about this for a little and it really feels we're on the path to LLMs becoming a commodity, similar to cloud computing. At this point, I would bet that for the average user the middle tier models for all the major players are more for their uses and any differences are indistinguishable. Even when major advancements are made by one party, it seems like everyone else can catch up pretty quick. I'd expect that to continue to happen, especially if companies start embracing open source as the future (like they're claiming they will). If that happens, the winner in this space won't be who has the best model, but who can build the better company. It's going to be able the deals they make, they products they build on top of their models, and who can bring their costs down the most.
TZubiri 2y ago
>"live up to their valuations" IDK, I won't pretend to know the difference between $61.5B and $123B, we can safely assume both will have a similar value, OpenAI as first mover, and Anthropic like a Pepsi. >What's the scenario where both Anthropic and OpenAI both live Pretty much all of them, their risk of failure is pretty much independent. You said software usually has near monopolies, which I agree, there's usually 3 or 4 or 10 big entities. To my estimation because of the need for competition and market segmentation. So the survival of one only conditions the other as a dependent event in the order of 1/10.
MangoCoffee 2y ago
according to fans of Deepseek and some people on HN, isn't LLM going to become a commodity?
smugma 2y ago
Counter-point: for “cloud”, there’s an oligopoly of AWS, GCP, and Azure that maybe make up 80%. And still there is plenty of space for those closely related, such as Cloudflare.
rajnathani 2y ago
There is a "big 3" rule to understand some capex intensive markets (in capitalistic markets with antitrust regulations), for example telco with AT&T, Verizon, and T-Mobile (similar for other countries), and for ride-sharing Uber, Lyft, and Bolt, etc.

outside1234 2y ago

Also feels like we are just waiting for someone to swoop in with a open source model like DeepSeek that wipes both of them out.

sour-taste 2y ago
Shouldn't deepseek have done that already?
- rtkwe 2y ago
  There's a lot of money riding on their being a lot of headroom left on LLM performance and usefulness. I personally have my doubts you can get their with the Chinese Room model of LLMs but that's where all the money and hype is riding.
- keithwhor 2y ago
  DeepSeek V3 is easily the best cost / performance non-reasoning model on the market but accessing it via API is not straightforward -- at least for people who want their model hosted in the US. For the layperson OpenAI / Anthropic are much more accessible. Some of OpenRouter's [0][1] providers seem bunk; their version is corrupted. Occasionally just get mangled outputs. Fireworks [2] is my best experience so far: their serverless API, haven't messed with custom deployments. Fast, performant, better than other models in its size category and less expensive. [0] https://openrouter.ai/deepseek/deepseek-chat:free https://openrouter.ai/deepseek/deepseek-chat:free [1] https://openrouter.ai/deepseek/deepseek-chat https://openrouter.ai/deepseek/deepseek-chat [2] https://fireworks.ai/models/fireworks/deepseek-v3 https://fireworks.ai/models/fireworks/deepseek-v3
AustinDev 2y ago
QwQ 32B has replaced Sonnet 3.7 for me for quick hack apps I write like. 'Service that converts youtube tutorial videos into step by step instructions with timestamp references for each step.' And I can run it locally!
- dchuk 2y ago
  Are you chatting with it directly or using it with a coding tool or IDE?
- radlad 2y ago
  For whatever reason, qwq on a Macbook under ollama & Open Web UI seems to often "stall out" for me. It just never reports it even started to answer. Have you experienced this at all? I don't have this issue with qwen2.5-coder, deepseek, etc.
whiplash451 2y ago
The product is much more than the model. Our hacker community is not a good proxy for the overall userbase.
- rowanseymour 2y ago
  Ok but where is the product? Aren't most people just using ChatGPT from a chat prompt like they can do with any other LLM?
  - deleted 2y ago
    [deleted]

xyzzy9563 2y ago

I think the way it works is that if the multiple providers get swamped by enough demand, it still drives up their profits and margins despite the existence of competitors. Similar things happen with cloud providers I think.

nerdponx 2y ago

> What's the scenario look like where multiple LLM providers like Anthropic and OpenAI both live up to their valuations? Protectionism by the US federal government.

mkolodny 2y ago
The same government where the head of the department of efficiency is also the owner of Anthropic’s and OpenAI’s competitor, xAI?

dmix 2y ago

Oligopolies often exist in the same general categories by serving different submarkets (regions, business vs consumer, large vs small business, specialization, etc). Especially when it's the category is just a technology, like databases with Oracle vs the many db vendors/services. If LLM's technically plateau then it's all about who can find those high $$ markets (coding, consumer chat, phone integrations).

blindriver 2y ago

It's not functionality. It's access to content. The real target is replacing search with AI, as well as locking up all content creators into exclusive deals so that other LLMs don't get access to the new data. Just like how streaming has locked video content under different vendors, LLMs will split information across multiple vendors and we will need to get subscriptions to different companies in order to search things in the future. And it's going to cost a lot of money for us peons to get access to data in the future.

mi_lk 2y ago
And what do they have to compete with Google on content access?
- mannycalavera42 2y ago
  better knowledge reach, the biggest search intent goal
xmprt 2y ago
> locking up all content creators into exclusive deals This is the worrying part. The real content creators are people like you or me (not reddit or stackoverflow) and we aren't getting a piece of the exclusive deals. So if this is the end game, then it means either exploiting real people who are writing things or that people stop using it and the internet uses a lot of its utility as a place for communication and shared knowledge; probably a bit of both
deleted 2y ago
[deleted]
fourside 2y ago
> locking up all content creators into exclusive deals so that other LLMs don't get access to the new data It seems like most (all?) foundational models were trained on stolen content. I’m not sure what content exclusivity looks like for LLMs. It’s not like Joe Rogan signing on with Spotify where they have exclusive distribution rights for a particular piece of content.

alex_abt 2y ago

The profit margin will come from government contracts. It's the Azure/AWS business model.

ibejoeb 2y ago

Anthropic is ahead of the game on the applied technology side. Claude code is pretty good. It feels like a product from the early PC days. There's so much further to go, and so many other verticals to get into.

swatcoder 2y ago

There doesn't need to be any such scenario, and there almost certainly isn't one. NewHype valuations reflect how confident current investors are that later investors are still coming and have nothing to do with specific profit models. Maybe the hype will pay off or maybe it won't, but during this phase all I need to believe is that I can get out before the tide turns. At this point, the carrot that keeps investors coming is that many many people still believe at least one of these companies will become the next IBM/Microsoft/Apple/Google in one way or another and we don't know which one yet. It's just buying tradable bets on a horse race that won't see its end for several more years. One horse could win, all the horses could drop dead, and none of it matters today: the game is in deftly trading those betting tickets as the odds shift.

throwup238 2y ago
This is the best take here. We’re in gold rush mode, everybody thinks there’s gold there and that the potential reward is worth the risk, even knowing that there’s a significant chance that their claim won’t find enough gold to make the investment worth it.
lawn 2y ago
Also called "selling to the greater fool", which has fueled bubbles for as long as we've recorded bubbles.
pj_mukh 2y ago
OR, the pie is big enough that a monopoly isn't required. The effect on the economy is so large that all of these companies become money printing machines. I personally don't think this is possible unless these AI Companies translate from just bits to atoms but that's not out of the question[1]. [1]: https://venturebeat.com/ai/openai-has-begun-building-out-its-robotics-team/ https://venturebeat.com/ai/openai-has-begun-building-out-its...
TechDebtDevin 2y ago
With 8 billion being their largest investor being Amazon, who has proclaimed they're going to spend 100bb on similar investments, these valuations and investment sizes, aren't even large relative to the investor's bankroll.

FloorEgg 2y ago

The answer to this question that I almost never see come up in these threads has nothing to do with moat or typical startup dynamics, it has to do with macro policy and theoretical economics. Our economic system is set up to continuously increase the supply of money at a rate that results in the average price of things consumers buy increasing 2% a year. Technology is a deflationary force and if our system wasn't constantly adding more money the price of almost all consumption goods would continuously fall. These investors are banking on the idea that these companies will automate so much high value labour that there is a massive wave of deflationary pressure on the economy, resulting in massive increases to the supply of money to balance it out. So by crude example; 10 years from now anthropic could end up with 1% market share and be worth $10 trillion.

dcdc123 2y ago

I use agentic tooling when programming all the time and I can say for certain that Claude feels _several times better_ than any OpenAI model, despite what the benchmarks show.

dimitri-vs 2y ago
Hot take: sonnet3.7 is as good if not better than OpenAIs $200/mon o1-pro model, were it were not for Deep Research I would have cancelled my ChatGPT subscription.

superfrank 2y ago

I've been thinking about this for a little and it really feels we're on the path to LLMs becoming a commodity, similar to cloud computing. At this point, I would bet that for the average user the middle tier models for all the major players are more for their uses and any differences are indistinguishable. Even when major advancements are made by one party, it seems like everyone else can catch up pretty quick. I'd expect that to continue to happen, especially if companies start embracing open source as the future (like they're claiming they will). If that happens, the winner in this space won't be who has the best model, but who can build the better company. It's going to be able the deals they make, they products they build on top of their models, and who can bring their costs down the most.

TZubiri 2y ago

>"live up to their valuations" IDK, I won't pretend to know the difference between $61.5B and $123B, we can safely assume both will have a similar value, OpenAI as first mover, and Anthropic like a Pepsi. >What's the scenario where both Anthropic and OpenAI both live Pretty much all of them, their risk of failure is pretty much independent. You said software usually has near monopolies, which I agree, there's usually 3 or 4 or 10 big entities. To my estimation because of the need for competition and market segmentation. So the survival of one only conditions the other as a dependent event in the order of 1/10.

MangoCoffee 2y ago

according to fans of Deepseek and some people on HN, isn't LLM going to become a commodity?

smugma 2y ago

Counter-point: for “cloud”, there’s an oligopoly of AWS, GCP, and Azure that maybe make up 80%. And still there is plenty of space for those closely related, such as Cloudflare.

rajnathani 2y ago

There is a "big 3" rule to understand some capex intensive markets (in capitalistic markets with antitrust regulations), for example telco with AT&T, Verizon, and T-Mobile (similar for other countries), and for ride-sharing Uber, Lyft, and Bolt, etc.