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That's also what I do not get. The companies are unprofitable because of competition, not because what they do cannot be profitable.

by patall 1y ago

leptons 1y ago
If it costs more to produce a result than a customer is willing to pay, then the company will either be unprofitable (sell at a loss) or just close up shop. The cost for running LLMs is much higher than what customers are likely to want to pay, and that has nothing to do with competition from other LLM companies, it's a result of high cost of cutting-edge hardware, infrastructure, and the massive amount of electricity it consumes - so much electricity that tech companies are now building power plants to power them (which are very expensive to build). It's a massive cost, and all for the hope that people will continue to accept AI slop.
- vb-8448 1y ago
  According to the data in the post, the cost of running the model for open AI in 2024 was 2B and if we strip out all training/research costs they had a loss of about 1B, peanuts. They can raise a little bit the standard subscription prices and turn profitable. The bulk of the cost was model training and research(~4B). They are forced to train new models and improve existing one because of the market and competition.
  - sumeno 1y ago
    > if we strip out all training/research costs You can't just strip out those costs. You have to train new models or the information in the model will be out of date.
    - vb-8448 1y ago
      It depends, if you have to retrain existing models using new data(basically updating the cutoff date) it will cost you much less than today ... and I'm pretty sure today they are aiming for speed and "intelligence improvement" and not training efficiency. The only scenario where the training cost won't decrease is in case the limit of the scaling law is not yet reached, or they discover new approaches. But from what we have seen this year, it doesn't seem to be the case. PS: Plus, we are still not speaking about the elephant in the room: ads. Today's revenues are basically from API usage and subscription, but we all know that at some point ads will come in, and the revenues will increase.

That's also what I do not get. The companies are unprofitable because of competition, not because what they do cannot be profitable.

by patall 1y ago

That's also what I do not get. The companies are unprofitable because of competition, not because what they do cannot be profitable.

leptons 1y ago

If it costs more to produce a result than a customer is willing to pay, then the company will either be unprofitable (sell at a loss) or just close up shop. The cost for running LLMs is much higher than what customers are likely to want to pay, and that has nothing to do with competition from other LLM companies, it's a result of high cost of cutting-edge hardware, infrastructure, and the massive amount of electricity it consumes - so much electricity that tech companies are now building power plants to power them (which are very expensive to build). It's a massive cost, and all for the hope that people will continue to accept AI slop.

vb-8448 1y ago
According to the data in the post, the cost of running the model for open AI in 2024 was 2B and if we strip out all training/research costs they had a loss of about 1B, peanuts. They can raise a little bit the standard subscription prices and turn profitable. The bulk of the cost was model training and research(~4B). They are forced to train new models and improve existing one because of the market and competition.
- sumeno 1y ago
  > if we strip out all training/research costs You can't just strip out those costs. You have to train new models or the information in the model will be out of date.
  - vb-8448 1y ago
    It depends, if you have to retrain existing models using new data(basically updating the cutoff date) it will cost you much less than today ... and I'm pretty sure today they are aiming for speed and "intelligence improvement" and not training efficiency. The only scenario where the training cost won't decrease is in case the limit of the scaling law is not yet reached, or they discover new approaches. But from what we have seen this year, it doesn't seem to be the case. PS: Plus, we are still not speaking about the elephant in the room: ads. Today's revenues are basically from API usage and subscription, but we all know that at some point ads will come in, and the revenues will increase.