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Yea, I don’t think investors really internalize that LLM companies have effectively zero moat. Customers can easily jump ship. Everyone is using effectively th

by Retric 1y ago

Yea, I don’t think investors really internalize that LLM companies have effectively zero moat. Customers can easily jump ship. Everyone is using effectively the same compute, nearly identical training data, very similar algorithms, etc. Worse past investments in a model become outdated quickly.

bee_rider 1y ago
Doesn’t xAI have a bunch of their own data-centers? https://arstechnica.com/tech-policy/2025/07/xai-gets-an-air-permit-to-power-its-supercomputer-but-pollution-fears-remain/ https://arstechnica.com/tech-policy/2025/07/xai-gets-an-air-... I wonder how investors have priced in their regulatory situation.
- v5v3 1y ago
  Think it only has that one (plus the x/twitter ones). They bought a cargo ship worth of GPUs though
  - moogly 1y ago
    Technically, I believe Tesla bought those.
Aurornis 1y ago
I think Hacker News readers underestimate how sticky the typical customer is. The average subscriber to these services isn’t following a constant stream of LLM news and jumping from platform to platform every time the leaderboard changes slightly. The average customer signs up and then inertia and familiarity take over. They stay signed and comfortable.
- ketzo 1y ago
  I mean — the person you’re describing is just a ChatGPT user and essentially nothing else, though, right? It explains OpenAI’s valuation but no one else
  - martinald 1y ago
    I'm astonished at the stickiness of chatgpt though. It's clearly not the best platform/model but all my none tech friends just equate LLMs = ChatGPT (4o as well).
    - DaSHacka 1y ago
      It just benefitted from the Kleenex/Google effect due to being the first real mainstream breakthrough of GPT tech among average users ("normies"). I expect, whether OpenAI is even still around in 15+ years or not, that my grandparents will continue telling me about "that ChatGPT" well into the future.
    - A_D_E_P_T 1y ago
      o3/o3-pro is probably the best model, or very close to being the best model, overall. It beats Grok 4 in writing/composition and analysis tasks. [1] Performance is a toss-up between o3 and Claude 4 Opus, but I find o3 easier to interact with and more trustworthy. (Less likely to push back against requests and more likely to attempt to fulfill them in good faith.) 4.5 is also great for certain things. Of all models, it's the second best writer. (DeepSeek R1 is the best prose stylist, surprisingly!) [1] - This is Grok 4: https://x.com/i/grok/share/e51O9rK0W7UaIN81nFBQoJDSs https://x.com/i/grok/share/e51O9rK0W7UaIN81nFBQoJDSs This is o3-pro, same question: https://chatgpt.com/s/t_68710185cf04819185dc25233280e46b https://chatgpt.com/s/t_68710185cf04819185dc25233280e46b o3 made fewer mistakes and drafted a more neatly structured and better written output.
      - xnx 1y ago
        No criticism, but I'm continually surprised how many comparisons leave out Gemini.
- Analemma_ 1y ago
  Doesn't that suggest a 200B valuation in xAI is stupid, though? Nobody is using Grok except Elon's fanboys, where do they imagine these sticky customers are going to come from?
  - alexnes 1y ago
    Please check google trends in regards to Grok (on a worldwide scale, and compare to openai, claude and deepseek). The winner is not clear at all. And grok is surprisingly popular.
    - c-hendricks 1y ago
      Huh? I see pretty clear winner with chatgpt https://imgur.com/a/a5oUldD https://imgur.com/a/a5oUldD
- jowea 1y ago
  Yeah, I think grandparent has a point, but at the same time, Google Search also didn't have a strong moat, or at least not one that couldn't be replicated in a few years, and it still positively dominated the market for decades.
  - deleted 1y ago
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  - deleted 1y ago
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  - Retric 1y ago
    Dominated market sure, able to charge any kind of subscription fee no. If winning the LLM’s game long term means the product needs to compete on cost and be the best to win, that’s not going to be nearly as profitable in the near term.
  - bryanlarsen 1y ago
    When the price is $0, the competitor has to be substantially better for consumers to switch. Bing reached quality comparable to Google, but never noticeably exceeded it. So people didn't switch. OTOH, the switch from Netscape -> IE6 -> Firefox -> Chrome did happen. But when the price is non-zero, that gives another dimension to compete on, and monopolies without significant barriers are much less common. It looks like good LLM's are going to have a price tag, so a monopoly is going to need a moat.
- rs186 1y ago
  Customer of what, model? In terms of AI coding assistant, almost every product out there allows you switch to a different model with a single click. If Gemini is not giving you the answer you want, what do you do? Switch to Claude and bang you have it. The only thing that has some stickiness is products like ChatGPT. But that's so much more than just a model -- it's a product with many features smoothly integrated. xAI does not currently have any product that is sticky for the average user.
  - v5v3 1y ago
    >xAI does not currently have any product that is sticky for the average user. Err... What about twitter? Where it is firmly embedded. And Telegram recently has been paid to do the same.
    - rs186 1y ago
      ok these features exist. Do we know they are sticky?
- bee_rider 1y ago
  Is the average consumer stuck to an LLM provider at this point, though? I guess the first one that normal people get attached to will be the one that gets into the Windows Start Menu, Siri, or whatever the Android equivalent is. Machines with LLM acceleration hardware are barely coming out at this point. I think it is early to expect people to really be stuck to anything.
- Gigachad 1y ago
  Sure, until it starts to cost money. The average consumer will have a look at alternatives once their current one starts asking for $20/month.
- mercer 1y ago
  Also don't forget the 'memory' feature. As LLM providers get better at tailoring the LLM to the user, and probably obfuscating the details on how this user-specific memory works, it will be harder to switch to another provider.
tintor 1y ago
Memory for end users, large gpu data centers, power plants and contracts to power them, and large amount of synthetic training data are the moat. OpenAI also announced their own web browser too.
827a 1y ago
The other thing that would scare me: What percentage of Anthropic's revenue comes from Anysphere/Cursor? Think about that for a second: Given that we know Cursor is on a nine-figure ARR now, the intrinsic value in being the "default" model in Cursor, similar to Google being the default search on iOS, is now worth billions of dollars. Does Anysphere have significant exclusivity arrangements with any of these frontier model providers? They took funding from OpenAI. The ludicrous clip at which Anthropic's revenue could drop by whole percentages just because Anysphere pushes a change to prefer competitors models, has got to be the scariest business arrangement in the history of computing. None of these companies will survive if they don't own multiple parts of the stack. As deep as possible, to the hardware if they can. That's why Anthropic is investing heavily in Claude Code, and why OpenAI is looking at hardware. You can't just build models and sell tokens, yet that seems to be Grok's entire strategy right now [1] [1] https://x.com/elonmusk/status/1943178423947661609 https://x.com/elonmusk/status/1943178423947661609
v5v3 1y ago
>No one is using Grok. They have no path to profitability. They have very low traction among consumers, and even lower traction among enterprises. Their CEO seems to think that copy-pasting code into a web browser is a good strategy for attracting programmers. Leaving aside the controversies, Elon is one of the best players at capitalism there has ever been. As per his wealth. And to think you and I know more than someone with a deep network of Investors and fellow CEO's would be a bold claim.

by Retric 1y ago

bee_rider 1y ago

Doesn’t xAI have a bunch of their own data-centers? https://arstechnica.com/tech-policy/2025/07/xai-gets-an-air-permit-to-power-its-supercomputer-but-pollution-fears-remain/ https://arstechnica.com/tech-policy/2025/07/xai-gets-an-air-... I wonder how investors have priced in their regulatory situation.

v5v3 1y ago
Think it only has that one (plus the x/twitter ones). They bought a cargo ship worth of GPUs though
- moogly 1y ago
  Technically, I believe Tesla bought those.

Aurornis 1y ago

I think Hacker News readers underestimate how sticky the typical customer is. The average subscriber to these services isn’t following a constant stream of LLM news and jumping from platform to platform every time the leaderboard changes slightly. The average customer signs up and then inertia and familiarity take over. They stay signed and comfortable.

ketzo 1y ago
I mean — the person you’re describing is just a ChatGPT user and essentially nothing else, though, right? It explains OpenAI’s valuation but no one else
- martinald 1y ago
  I'm astonished at the stickiness of chatgpt though. It's clearly not the best platform/model but all my none tech friends just equate LLMs = ChatGPT (4o as well).
  - DaSHacka 1y ago
    It just benefitted from the Kleenex/Google effect due to being the first real mainstream breakthrough of GPT tech among average users ("normies"). I expect, whether OpenAI is even still around in 15+ years or not, that my grandparents will continue telling me about "that ChatGPT" well into the future.
  - A_D_E_P_T 1y ago
    o3/o3-pro is probably the best model, or very close to being the best model, overall. It beats Grok 4 in writing/composition and analysis tasks. [1] Performance is a toss-up between o3 and Claude 4 Opus, but I find o3 easier to interact with and more trustworthy. (Less likely to push back against requests and more likely to attempt to fulfill them in good faith.) 4.5 is also great for certain things. Of all models, it's the second best writer. (DeepSeek R1 is the best prose stylist, surprisingly!) [1] - This is Grok 4: https://x.com/i/grok/share/e51O9rK0W7UaIN81nFBQoJDSs https://x.com/i/grok/share/e51O9rK0W7UaIN81nFBQoJDSs This is o3-pro, same question: https://chatgpt.com/s/t_68710185cf04819185dc25233280e46b https://chatgpt.com/s/t_68710185cf04819185dc25233280e46b o3 made fewer mistakes and drafted a more neatly structured and better written output.
    - xnx 1y ago
      No criticism, but I'm continually surprised how many comparisons leave out Gemini.
Analemma_ 1y ago
Doesn't that suggest a 200B valuation in xAI is stupid, though? Nobody is using Grok except Elon's fanboys, where do they imagine these sticky customers are going to come from?
- alexnes 1y ago
  Please check google trends in regards to Grok (on a worldwide scale, and compare to openai, claude and deepseek). The winner is not clear at all. And grok is surprisingly popular.
  - c-hendricks 1y ago
    Huh? I see pretty clear winner with chatgpt https://imgur.com/a/a5oUldD https://imgur.com/a/a5oUldD
jowea 1y ago
Yeah, I think grandparent has a point, but at the same time, Google Search also didn't have a strong moat, or at least not one that couldn't be replicated in a few years, and it still positively dominated the market for decades.
- deleted 1y ago
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- deleted 1y ago
  [deleted]
- Retric 1y ago
  Dominated market sure, able to charge any kind of subscription fee no. If winning the LLM’s game long term means the product needs to compete on cost and be the best to win, that’s not going to be nearly as profitable in the near term.
- bryanlarsen 1y ago
  When the price is $0, the competitor has to be substantially better for consumers to switch. Bing reached quality comparable to Google, but never noticeably exceeded it. So people didn't switch. OTOH, the switch from Netscape -> IE6 -> Firefox -> Chrome did happen. But when the price is non-zero, that gives another dimension to compete on, and monopolies without significant barriers are much less common. It looks like good LLM's are going to have a price tag, so a monopoly is going to need a moat.
rs186 1y ago
Customer of what, model? In terms of AI coding assistant, almost every product out there allows you switch to a different model with a single click. If Gemini is not giving you the answer you want, what do you do? Switch to Claude and bang you have it. The only thing that has some stickiness is products like ChatGPT. But that's so much more than just a model -- it's a product with many features smoothly integrated. xAI does not currently have any product that is sticky for the average user.
- v5v3 1y ago
  >xAI does not currently have any product that is sticky for the average user. Err... What about twitter? Where it is firmly embedded. And Telegram recently has been paid to do the same.
  - rs186 1y ago
    ok these features exist. Do we know they are sticky?
bee_rider 1y ago
Is the average consumer stuck to an LLM provider at this point, though? I guess the first one that normal people get attached to will be the one that gets into the Windows Start Menu, Siri, or whatever the Android equivalent is. Machines with LLM acceleration hardware are barely coming out at this point. I think it is early to expect people to really be stuck to anything.
Gigachad 1y ago
Sure, until it starts to cost money. The average consumer will have a look at alternatives once their current one starts asking for $20/month.
mercer 1y ago
Also don't forget the 'memory' feature. As LLM providers get better at tailoring the LLM to the user, and probably obfuscating the details on how this user-specific memory works, it will be harder to switch to another provider.

tintor 1y ago

Memory for end users, large gpu data centers, power plants and contracts to power them, and large amount of synthetic training data are the moat. OpenAI also announced their own web browser too.

827a 1y ago

The other thing that would scare me: What percentage of Anthropic's revenue comes from Anysphere/Cursor? Think about that for a second: Given that we know Cursor is on a nine-figure ARR now, the intrinsic value in being the "default" model in Cursor, similar to Google being the default search on iOS, is now worth billions of dollars. Does Anysphere have significant exclusivity arrangements with any of these frontier model providers? They took funding from OpenAI. The ludicrous clip at which Anthropic's revenue could drop by whole percentages just because Anysphere pushes a change to prefer competitors models, has got to be the scariest business arrangement in the history of computing. None of these companies will survive if they don't own multiple parts of the stack. As deep as possible, to the hardware if they can. That's why Anthropic is investing heavily in Claude Code, and why OpenAI is looking at hardware. You can't just build models and sell tokens, yet that seems to be Grok's entire strategy right now [1] [1] https://x.com/elonmusk/status/1943178423947661609 https://x.com/elonmusk/status/1943178423947661609

v5v3 1y ago

>No one is using Grok. They have no path to profitability. They have very low traction among consumers, and even lower traction among enterprises. Their CEO seems to think that copy-pasting code into a web browser is a good strategy for attracting programmers. Leaving aside the controversies, Elon is one of the best players at capitalism there has ever been. As per his wealth. And to think you and I know more than someone with a deep network of Investors and fellow CEO's would be a bold claim.