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The flip side is that these companies seem to be capacity constrained (although that is hard to confirm). If you assume the labs are capacity constrained, which

The flip side is that these companies seem to be capacity constrained (although that is hard to confirm). If you assume the labs are capacity constrained, which seems plausible, then building more capacity could pay off by allowing labs to serve more customers and increase revenue per customer. This means the bigger questions are whether you believe the labs are compute constrained, and whether you believe more capacity would allow them to drive actual revenue. I think there is a decent chance of this being true, and under this reality the investments make more sense. I can especially believe this as we see higher-cost products like Claude Code grow rapidly with much higher token usage per user. This all hinges on demand materialising when capacity increases, and margins being good enough on that demand to get a good ROI. But that seems like an easier bet for investors to grapple with than trying to compare future investment in capacity with today's revenue, which doesn't capture the whole picture.

Forgeties79 9mo ago
I am not someone who would ever be ever be considered an expert on factories/manufacturing of any kind, but my (insanely basic) understanding is that typically a “factory” making whatever widgets or doodads is outputting at a profit or has a clear path to profitability in order to pay off a loan/investment. They have debt, but they’re moving towards the black in a concrete, relatively predictable way - no one speculates on a factory anywhere near the degree they do with AI companies currently. If said factory’s output is maxed and they’re still not making money, then it’s a losing investment and they wouldn’t expand. Basically, it strikes me as not really apples to apples.
- sothatsit 9mo ago
  Consensus seems to be that the labs are profitable on inference. They are only losing money on training and free users. The competition requiring them to spend that money on training and free users does complicate things. But when you just look at it from an inference perspective, looking at these data centres like token factories makes sense. I would definitely pay more to get faster inference of Opus 4.5, for example. This is also not wholly dissimilar to other industries where companies spend heavily on R&D while running profitable manufacturing. Pharma semiconductors, and hardware companies like Samsung or Apple all do this. The unusual part with AI labs is the ratio and the uncertainty, but that's a difference of degree, not kind.
  - Eisenstein 9mo ago
    > But when you just look at it from an inference perspective, looking at these data centres like token factories makes sense. So if you ignore the majority of the costs, then it makes sense. Opus 4.5 was released on November 25, 2025. That is less than 2 months ago. When they stop training new models, then we can forget about training costs.
    - sothatsit 9mo ago
      Inference costs scale linearly with usage. R&D expenses do not. That's not to mention that Dario Amodei has said that their models actually have a good return, even when accounting for training costs [0]. [0] https://youtu.be/GcqQ1ebBqkc?si=Vs2R4taIhj3uwIyj&t=1088 https://youtu.be/GcqQ1ebBqkc?si=Vs2R4taIhj3uwIyj&t=1088
      - Eisenstein 9mo ago
        > Inference costs scale linearly with usage. R&D expenses do not. Do we know this is true for AI?
        sothatsit 9mo ago
        Yes. R&D is guaranteed to fall as a percentage of costs eventually. The only question is when, and there is also a question of who is still solvent when that time comes. It is competition and an innovation race that keeps it so high, and it won't stay so high forever. Either rising revenues or falling competition will bring R&D costs down as a percentage of revenue at some point.
        saagarjha 9mo ago
        Yes, but eventually may be longer than the market can hold out. So far R&D expenses have skyrocketed and it does not look like that will be changing anytime soon.
        9mo ago

Forgeties79 9mo ago

I am not someone who would ever be ever be considered an expert on factories/manufacturing of any kind, but my (insanely basic) understanding is that typically a “factory” making whatever widgets or doodads is outputting at a profit or has a clear path to profitability in order to pay off a loan/investment. They have debt, but they’re moving towards the black in a concrete, relatively predictable way - no one speculates on a factory anywhere near the degree they do with AI companies currently. If said factory’s output is maxed and they’re still not making money, then it’s a losing investment and they wouldn’t expand. Basically, it strikes me as not really apples to apples.

sothatsit 9mo ago
Consensus seems to be that the labs are profitable on inference. They are only losing money on training and free users. The competition requiring them to spend that money on training and free users does complicate things. But when you just look at it from an inference perspective, looking at these data centres like token factories makes sense. I would definitely pay more to get faster inference of Opus 4.5, for example. This is also not wholly dissimilar to other industries where companies spend heavily on R&D while running profitable manufacturing. Pharma semiconductors, and hardware companies like Samsung or Apple all do this. The unusual part with AI labs is the ratio and the uncertainty, but that's a difference of degree, not kind.
- Eisenstein 9mo ago
  > But when you just look at it from an inference perspective, looking at these data centres like token factories makes sense. So if you ignore the majority of the costs, then it makes sense. Opus 4.5 was released on November 25, 2025. That is less than 2 months ago. When they stop training new models, then we can forget about training costs.
  - sothatsit 9mo ago
    Inference costs scale linearly with usage. R&D expenses do not. That's not to mention that Dario Amodei has said that their models actually have a good return, even when accounting for training costs [0]. [0] https://youtu.be/GcqQ1ebBqkc?si=Vs2R4taIhj3uwIyj&t=1088 https://youtu.be/GcqQ1ebBqkc?si=Vs2R4taIhj3uwIyj&t=1088
    - Eisenstein 9mo ago
      > Inference costs scale linearly with usage. R&D expenses do not. Do we know this is true for AI?
      - sothatsit 9mo ago
        Yes. R&D is guaranteed to fall as a percentage of costs eventually. The only question is when, and there is also a question of who is still solvent when that time comes. It is competition and an innovation race that keeps it so high, and it won't stay so high forever. Either rising revenues or falling competition will bring R&D costs down as a percentage of revenue at some point.
        saagarjha 9mo ago
        Yes, but eventually may be longer than the market can hold out. So far R&D expenses have skyrocketed and it does not look like that will be changing anytime soon.
        9mo ago