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Impressive round but it seems unlikely this game can go on much longer before something implodes. Given the amount of cash you need to set of fire to stay relev

Impressive round but it seems unlikely this game can go on much longer before something implodes. Given the amount of cash you need to set of fire to stay relevant it’s becoming nearly impossible for all but a few players to stay competitive, but those players have yet to demonstrate a viable business model. With all these models converging, the big players aren’t demonstrating a real technical innovation moat. Everyone knows how to build these models now, it just takes a ton of cash to do it. This whole thing is turning into an expensive race to the bottom. Cool tech, but bad business. A lot of VC folks gonna lose their shirt in this space.

dcchambers 1y ago
And unfortunately, the amount of money being thrown around means that when the bottom falls out and its revealed that the emperor has no clothes, the implosion is going to impact all of us. It's going to rock the market like we've never seen before.
- jononor 1y ago
  Hope it stays long enough to build up serious electricity generation, storage and distribution. Cause that has a lot of productive uses, and has historically been underdeveloped (in favor of fossile fuels). Though there will likely be a squeeze before we get there...
  - axus 1y ago
    The electricians in data center country report they are earning a lot of money.
- nathan_douglas 1y ago
  It'd be an interesting time for China to invade Taiwan.
- m101 1y ago
  Why is this downvoted when it's spot on.. if reality < expectations so much money is sitting on extremely quickly depreciating assets. It will be bad. Risk is to the downside.
  - dcchambers 1y ago
    Being critical of AI companies on Hacker News is pretty tough these days. Either the majority of people are all-in and want to bury their heads in the sand to the real dangers and risks (economical, psychological, etc) or there's just lots of astroturfing going on.
    - aoeusnth1 1y ago
      All of the top upvoted comments are calling or implying this is a bubble. It seems to me the majority loves to imagine themselves persecuted in their home turf.
xpe 1y ago
> Everyone knows how to build these models now, it just takes a ton of cash to do it. This ignores differential quality, efficiency, partnerships, and lots more.
- utyop22 1y ago
  Maybe in enterprise. But in the consumer market segment, for most cases, its all about who is cheapest (free preferably) - aside from the few loonies who care about personality. The true lasting economic benefits within enterprise are yet to play out. The trade off between faster code production vs poorer maintained code is yet to play out.
  - xpe 1y ago
    > But in the consumer market segment, for most cases, its all about who is cheapest (free preferably) - aside from the few loonies who care about personality. On what basis do you know this? Or more like your personal impression — based on asking how many people? Your friends?
    - utyop22 1y ago
      I have a wide ranging sample of folks I've spoken to and observed their usage.
      - xpe 1y ago
        >10? >33? >100? >333? Just informal conversations? Or surveys of some kind? I’m genuinely curious. After studying statistics and research design, I have learned to be very cautious at what I conclude. I often talk with various people outside of my usual peer and work groups, but I wouldn’t know how to get anything close to an unbiased take given the social constraints. Maybe I would notice large shifts over time. Observation: LLMs are pretty new in the scheme of things and information diffusion seems pretty different across age groups, geographies, and professions. This makes it pretty hard to even be confident that one knows how to collect good data.
1oooqooq 1y ago
you say it can't go much longer, yet herbalife is still listed.
rsanek 1y ago
I was convinced of this line of thinking for a while too but lately I'm not so sure. In software in particular, I think it's actually quite relevant what you can do in-house with a SOTA model (especially in the tool calling / fine tuning phase) that you just don't get with the same model via API. Think Cursor vs. Claude Code -- you can use the same model in Cursor, but the experience with CC is far and away better. I think of it a bit like the Windows vs. macOS comparison. Obviously there will be many players that will build their own scaffolding around open or API-based models. But there is still a significant benefit to a single company being able to build both the model itself as well as the scaffolding and offering it as a unit.
- mritchie712 1y ago
  CC being better than Cursor didn't make sense to me until I realized Anthropic trains[0] it's models to use it's own built-in tools[1]. 0 - https://x.com/thisritchie/status/1944038132665454841 https://x.com/thisritchie/status/1944038132665454841 1- https://docs.anthropic.com/en/docs/agents-and-tools/tool-use/text-editor-tool https://docs.anthropic.com/en/docs/agents-and-tools/tool-use...
  - jgraettinger1 1y ago
    It still doesn't make sense. Cursor undoubtedly has smart engineers who could implement the Anthropic text editing tool interface in their IDE. Why not just do that for one of your most important LLM integrations?
    - mritchie712 1y ago
      I agree it doesn't make sense. I'd think they could alias their own tools to match Anthropic's, but my guess is they don't want to customize too heavily on any given model.
- klausa 1y ago
  My gut feeling is that Claude Code being so popular is: - 60% just having a much better UX and having any amount of "taste", compared to Cursor - 39,9% being able to subsidize the raw token costs compared to what's being billed to Cursor - 0,1% some magical advantage by also training the model Claude Code is just much _pleasant_ to use than most other tools, and I think people are overly discounting that aspect of it. I'd rather use CC with slightly dumber model, than Cursor with a slightly better one; and I suspect I'm far from being the only one.
ijidak 1y ago
I think we underestimate the insane amount of idle cash the rich have. We know that the top 1% owns something like 80% of all resources, so they don't need that money. They can afford to burn a good chunk of global wealth so that they can have even more global wealth. Even at the current rates of insanity, the wealthy have spent a tiny fraction of their wealth on AI. Bezos could put up this $13 billion himself and remain a top five richest man in the world. (Remember Elon cost himself $40 billion because of a tweet and still was fine!) This is a technology that could replace a sizable fraction of humamkind as a labor input. I'm sure the rich can dig much deeper than this.
- not_the_fda 1y ago
  "This is a technology that could replace a sizable fraction of humamkind as a labor input." And if it does? What happens when a sizable fraction of humamkind is hungry and can't find work? It usually doesn't turn out so well for the rich.
  - dweekly 1y ago
    I don't think most folks think very hard about where most wealth comes from but imagine it just sort of exists in a fixed quantity or is pulled from the ground like coal or diamonds - there's a fixed amount of it, and if there are very rich people, it must be because they took the coal/diamonds away from other people who need it. This leads to catchy slogans. But it's pretty obvious wealth can be created and destroyed. The creation of wealth comes from trade, which generally comes from a vibrant middle class which not only earns a fair bit but also spends it. Wars and revolutions are effective at destroying wealth and (sometimes) equitably redistributing what's left. Both the modern left and modern right seem to have arrived at a consensus that trade frictions are a good way to generate (or at least preserve) wealth, while the history of economics indicates quite the contrary. This was recently best pilloried by a comic that showed a town under siege and the besieging army commenting that this was likely to make the city residents wealthy by encouraging self-reliance. We need abundant education and broad prosperity for stability - even (and maybe especially) for the ultra wealthy. Most things we enjoy require absolute and not relative wealth. Would you rather be the richest person in a poor country or the poorest of the upper class in a developed economy?
criemen 1y ago
I'm not so confident in that yet. If you look at the inference prices Anthropic charges (on the API) it's not a race to the bottom - they are asking for what I feel is a lot of money - yet people keep paying that.
- worldsayshi 1y ago
  Yeah, a collapse should only mean that training larger models become non viable right? Selling inference alone should still deliver profit.
- cruffle_duffle 1y ago
  Their employers are paying that money. The jury is still out on how wisely that money is being spent.
AbstractH24 1y ago
Where are we in that cycle though? How close to the top?

dcchambers 1y ago

And unfortunately, the amount of money being thrown around means that when the bottom falls out and its revealed that the emperor has no clothes, the implosion is going to impact all of us. It's going to rock the market like we've never seen before.

jononor 1y ago
Hope it stays long enough to build up serious electricity generation, storage and distribution. Cause that has a lot of productive uses, and has historically been underdeveloped (in favor of fossile fuels). Though there will likely be a squeeze before we get there...
- axus 1y ago
  The electricians in data center country report they are earning a lot of money.
nathan_douglas 1y ago
It'd be an interesting time for China to invade Taiwan.
m101 1y ago
Why is this downvoted when it's spot on.. if reality < expectations so much money is sitting on extremely quickly depreciating assets. It will be bad. Risk is to the downside.
- dcchambers 1y ago
  Being critical of AI companies on Hacker News is pretty tough these days. Either the majority of people are all-in and want to bury their heads in the sand to the real dangers and risks (economical, psychological, etc) or there's just lots of astroturfing going on.
  - aoeusnth1 1y ago
    All of the top upvoted comments are calling or implying this is a bubble. It seems to me the majority loves to imagine themselves persecuted in their home turf.

xpe 1y ago

> Everyone knows how to build these models now, it just takes a ton of cash to do it. This ignores differential quality, efficiency, partnerships, and lots more.

utyop22 1y ago
Maybe in enterprise. But in the consumer market segment, for most cases, its all about who is cheapest (free preferably) - aside from the few loonies who care about personality. The true lasting economic benefits within enterprise are yet to play out. The trade off between faster code production vs poorer maintained code is yet to play out.
- xpe 1y ago
  > But in the consumer market segment, for most cases, its all about who is cheapest (free preferably) - aside from the few loonies who care about personality. On what basis do you know this? Or more like your personal impression — based on asking how many people? Your friends?
  - utyop22 1y ago
    I have a wide ranging sample of folks I've spoken to and observed their usage.
    - xpe 1y ago
      >10? >33? >100? >333? Just informal conversations? Or surveys of some kind? I’m genuinely curious. After studying statistics and research design, I have learned to be very cautious at what I conclude. I often talk with various people outside of my usual peer and work groups, but I wouldn’t know how to get anything close to an unbiased take given the social constraints. Maybe I would notice large shifts over time. Observation: LLMs are pretty new in the scheme of things and information diffusion seems pretty different across age groups, geographies, and professions. This makes it pretty hard to even be confident that one knows how to collect good data.

1oooqooq 1y ago

you say it can't go much longer, yet herbalife is still listed.

rsanek 1y ago

I was convinced of this line of thinking for a while too but lately I'm not so sure. In software in particular, I think it's actually quite relevant what you can do in-house with a SOTA model (especially in the tool calling / fine tuning phase) that you just don't get with the same model via API. Think Cursor vs. Claude Code -- you can use the same model in Cursor, but the experience with CC is far and away better. I think of it a bit like the Windows vs. macOS comparison. Obviously there will be many players that will build their own scaffolding around open or API-based models. But there is still a significant benefit to a single company being able to build both the model itself as well as the scaffolding and offering it as a unit.

mritchie712 1y ago
CC being better than Cursor didn't make sense to me until I realized Anthropic trains[0] it's models to use it's own built-in tools[1]. 0 - https://x.com/thisritchie/status/1944038132665454841 https://x.com/thisritchie/status/1944038132665454841 1- https://docs.anthropic.com/en/docs/agents-and-tools/tool-use/text-editor-tool https://docs.anthropic.com/en/docs/agents-and-tools/tool-use...
- jgraettinger1 1y ago
  It still doesn't make sense. Cursor undoubtedly has smart engineers who could implement the Anthropic text editing tool interface in their IDE. Why not just do that for one of your most important LLM integrations?
  - mritchie712 1y ago
    I agree it doesn't make sense. I'd think they could alias their own tools to match Anthropic's, but my guess is they don't want to customize too heavily on any given model.
klausa 1y ago
My gut feeling is that Claude Code being so popular is: - 60% just having a much better UX and having any amount of "taste", compared to Cursor - 39,9% being able to subsidize the raw token costs compared to what's being billed to Cursor - 0,1% some magical advantage by also training the model Claude Code is just much _pleasant_ to use than most other tools, and I think people are overly discounting that aspect of it. I'd rather use CC with slightly dumber model, than Cursor with a slightly better one; and I suspect I'm far from being the only one.

ijidak 1y ago

I think we underestimate the insane amount of idle cash the rich have. We know that the top 1% owns something like 80% of all resources, so they don't need that money. They can afford to burn a good chunk of global wealth so that they can have even more global wealth. Even at the current rates of insanity, the wealthy have spent a tiny fraction of their wealth on AI. Bezos could put up this $13 billion himself and remain a top five richest man in the world. (Remember Elon cost himself $40 billion because of a tweet and still was fine!) This is a technology that could replace a sizable fraction of humamkind as a labor input. I'm sure the rich can dig much deeper than this.

not_the_fda 1y ago
"This is a technology that could replace a sizable fraction of humamkind as a labor input." And if it does? What happens when a sizable fraction of humamkind is hungry and can't find work? It usually doesn't turn out so well for the rich.
- dweekly 1y ago
  I don't think most folks think very hard about where most wealth comes from but imagine it just sort of exists in a fixed quantity or is pulled from the ground like coal or diamonds - there's a fixed amount of it, and if there are very rich people, it must be because they took the coal/diamonds away from other people who need it. This leads to catchy slogans. But it's pretty obvious wealth can be created and destroyed. The creation of wealth comes from trade, which generally comes from a vibrant middle class which not only earns a fair bit but also spends it. Wars and revolutions are effective at destroying wealth and (sometimes) equitably redistributing what's left. Both the modern left and modern right seem to have arrived at a consensus that trade frictions are a good way to generate (or at least preserve) wealth, while the history of economics indicates quite the contrary. This was recently best pilloried by a comic that showed a town under siege and the besieging army commenting that this was likely to make the city residents wealthy by encouraging self-reliance. We need abundant education and broad prosperity for stability - even (and maybe especially) for the ultra wealthy. Most things we enjoy require absolute and not relative wealth. Would you rather be the richest person in a poor country or the poorest of the upper class in a developed economy?

criemen 1y ago

I'm not so confident in that yet. If you look at the inference prices Anthropic charges (on the API) it's not a race to the bottom - they are asking for what I feel is a lot of money - yet people keep paying that.

worldsayshi 1y ago
Yeah, a collapse should only mean that training larger models become non viable right? Selling inference alone should still deliver profit.
cruffle_duffle 1y ago
Their employers are paying that money. The jury is still out on how wisely that money is being spent.

AbstractH24 1y ago

Where are we in that cycle though? How close to the top?