4 ms·

I don't think it's a secret that AI companies are losing a ton of money on subscription plans. Hence the stricter rate limits, new $200+ plans, push towards adv

by paxys 9mo ago

I don't think it's a secret that AI companies are losing a ton of money on subscription plans. Hence the stricter rate limits, new $200+ plans, push towards advertising etc. The real money is in per-token billing via the API (and large companies having enough AI FOMO that they blindly pay the enormous invoices every month).

Someone1234 9mo ago
I agree; unfortunately when I brought up that they're losing before I get jumped on demanding me to "prove it" and I guess pointing at their balance sheets isn't good enough.
sambull 9mo ago
The secret is there is no path on making that back.
- JimmaDaRustla 9mo ago
  My crude metaphor to explain to my family is gasoline has just been invented and we're all being lent Bentley's to get us addicted to driving everywhere. Eventually we won't be given free Bentley's, and someone is going to be holding the bag when the infinite money machine finally has a hiccup. The tech giants are hoping their gasoline is the one that we all crave when we're left depending on driving everywhere and the costs go soaring.
  - eru 9mo ago
    Why? Computers and anything computer related have historically been dropping in prices like crazy year after year (with only very occasional hiccups). What makes you think this will stop now?
    - adrianN 9mo ago
      Cars have also been dropping in price.
      - sciencejerk 9mo ago
        Evidence for this claim?
        adrianN 9mo ago
        A few generations ago almost nobody could afford a car, now many low income families afford two.
        sciencejerk 9mo ago
        Maybe cars are not cheaper, just easier to finance due to the modern credit systems?
        fatherwavelet 9mo ago
        I had a 1990 Ford Taurus as my first car. I had got it used and I remember it being completely impossible to afford a new car at the time. It was sticker price of $33,000 adjusted for inflation: https://en.wikipedia.org/wiki/Ford_Taurus_%28second_generation%29#/media/File:Ford_Taurus_--_07-09-2009.jpg https://en.wikipedia.org/wiki/Ford_Taurus_%28second_generati... I don't think it would even feel safe to drive at all compared to what we have got use to with modern cars. It broke down 3 times while I had it and stranded me on the road. No cell phone of course to call anyone. These were the mythic "good ol days".
      - Wobbles42 9mo ago
        And knives apparently. I recently encountered this randomly -- knives are apparently one of the few products that nearly every household has needed since antiquity, and they have changed fairly little since the bronze age, so they are used by economists as a benchmark that can span centuries. Source: it was an aside in a random economics conversation with charGPT (grain of salt?). There is no practical upshot here, but I thought it was cool.
        sarchertech 9mo ago
        Yeah I’d definitely take that knife thing with a grain of salt. I have most of a history degree, took a lot of Econ classes (before later going back for CS), and it’s a topic I’m very interested in and I’ve never heard that (and some digging didn’t find anything). It’s also false that the technology has changed very little. The jumps from bronze to iron to steel to modern steel and sometimes to stainless steel all result in vastly different products. Not to mention the advances in composite materials for handles. Then you need to look at substitute goods and the what people actually used knives for. A huge amount of the demand for knives evaporated thanks to societal changes and substitute goods like forks. A few hundred years ago the average person had a knife that was their primary eating utensil, a survival tool, and a self defense weapon. Knives like that exist today but they’re not something every household has or needs. This is a good example of why learning from ChatGPT is dangerous. This is a story that sounds very plausible at first glance, but doesn’t make sense once you dig in.
    - walterbell 9mo ago
      Recent price trends for DRAM, SSDs, hard drives?
      - aftbit 9mo ago
        Short term squeeze, because building capacity takes time and real funding. The component manufacturers have been here before. Booms rarely last long enough to justify a build-out. If AI demand turns out to be sustained, the market will eventually adapt by building supply, and prices will drop. If AI demand turns out to be transient, demand will drop, and prices will drop.
    - shykes 9mo ago
      Commodity hardware and software will continue to drop in price. Enterprise products with sufficient market share and "stickiness", will not. For historical precedent, see the commercial practices of Oracle, Microsoft, Vmware, Salesforce, at the height of their power.
      - hugmynutus 9mo ago
        > Commodity hardware and software will continue to drop in price. The software is free (citation: Cuda, nvcc, llvm, olama/llama cpp, linux, etc) The hardware is *not* getting cheaper (unless we're talking a 5+ year time) as most manufacturers are signaling the current shortages will continue ~24 months.
        denimnerd42 9mo ago
        GB300 NVL72 is 50% more expensive than GB200 I've heard.
        eru 9mo ago
        > The hardware is not getting cheaper (unless we're talking a 5+ year time) Yes, that's the time I'm talking about. You also had a blip with increasing hard disk prices when Thailand flooded a few years ago.
        shykes 9mo ago
        > The software is free (citation: Cuda, nvcc, llvm, olama/llama cpp, linux, etc) If you factor in the cost of integration and ongoing maintenance - by humans or llms - it is not free. But it certainly has never been cheaper.
    - CamperBob2 9mo ago
      In the GP's analogy, the Bentley can be rented for $3/day, but if you want to purchase it outright, it will cost you $3,000,000. Despite the high price, the Bentley factory is running 24/7 and still behind schedule due to orders placed by the rental-car company, who has nearly-infinite money.
    - Wobbles42 9mo ago
      It has stopped. Demand is now rising faster than supply in memory, storage and GPUs. We see vendors reducing memory in new smart phones in 2026 vs 2025 for example. At least for the moment falling consumer tech hardware prices are over.
      - HDThoreaun 9mo ago
        Memory and storage has always been very cyclical. This is nothing new
    - Ekaros 9mo ago
      On consumer side looking at a few past generations I question that. I would guess that we are nearing some sort of plateau there or already on it. There was inflation, but still not even considering RAM prices from last jump gains relative to cost were not that massive.
    - JimmaDaRustla 9mo ago
      Please show me where any AI company is currently turning a profit with their current offering and price structure, then let's have that conversation.
  - rizky05 9mo ago
    [dead]
  - echelon 9mo ago
    I like this analogy. I also think we're, as ICs, being given Bentleys meanwhile they're trying to invent Waymos to put us all out of work. Humans are the cost center in their world model.
- snihalani 9mo ago
  how do I understand what is the sustainable pricing?
- stingrae 9mo ago
  the path is by charging just a bit less than the salary of the engineers they are replacing.
  - nananana9 9mo ago
    After hearing this 10 times a day for the last 5 years I'm starting to get a bit tired. Do you have a rough time for when this great replacement is coming? 1 year? 2? 5? If it's longer than that can we shut up about it for a few years please.
    - stingrae 9mo ago
      It’s happening already? Ask any new CS grads about how good the job market is.
      - shimman 9mo ago
        A poor economy that is still dealing with a decade+ of ZIRP, COVID shock, tariffs, and political strife; I don't see how AI has much, if anything, to do with this when compared with other options. If AI was truly this productive they wouldn't be struggling so hard to sell their wares.
mattas 9mo ago
The question I have: how much are they _also_ losing on per-token billing?
- imachine1980_ 9mo ago
  From what I understand, they make money per-token billing. Not enough for how much it costs to train, not accounting for marketing, subscription services, and research for new models, but if they are used, they lose less money. Finance 101 tldr explanation: The contribution margin (= price per token -variable cost per token ) this is positive Profit (= contribution margin x cuantity- fix cost)
  - andersmurphy 9mo ago
    Do they make enough to replace their GPUs in two years?
    - imachine1980_ 9mo ago
      if 100% of the money they spend is in inference priced by tokens (they don't say about subscriptions so i asume they lost money), yes they make money, but their expenses are way higher than inference alone. so they can make the gpu cost if they sell tokens but in reality this isnt the case, becouse they have to constaly train new models, subscription marketing, R&D, And overhead. antropic in general lost way less money than their competitors i will take this number in particular the projected break even but googling say Gross margin in this case is how much money they do whit the GPU " Gross Margins: Projected to swing from negative 94% last year to as much as 50% this year, and 77% by 2028. Projected Break-even: The company expects to be cash flow positive by 2027 or 2028. " i will not be as bullish to say they will no colapse (0 idear how much real debt and commitments they have, if after the bubble pop spending fall shraply, or a new deepseek moment) but this sound like good trajectory (all things considered) i heavily doubt the 380 billions in valuation "this is how much is spendeed in developers between $659 billion and $737 billion. The United States is the largest driver of this spending, accounting for more than half of the global total ($368.5 billion in 2024)" so is like saying that a 2% of all salaries of developers in the world will be absorbed as profit whit the current 33.3 ratio, quite high giving the amount of risk of the company.
croes 9mo ago
But why does it matter which program you use to consume the tokens? The sounds like a confession that claude code is somewhat wasteful at token use.
- airstrike 9mo ago
  No, it's a confession they have no moat other than trying to hold onto the best model for a given use case. I find that competitive edge unlikely to last meaningfully in the long term, but this is still a contrarian view. More recently, people have started to wise up to the view that the value is in the application layer https://www.iconiqcapital.com/growth/reports/2026-state-of-ai-bi-annual-snapshot https://www.iconiqcapital.com/growth/reports/2026-state-of-a...
  - croes 9mo ago
    But if more users use your service you get an advantage. Letting the users chose their tool for that would be a good thing.
hannasm 9mo ago
Honestly I think I am already sold on AI, who is the first company that is going to show us all how much it really costs and start enshitification? First to market wins right?
mirzap 9mo ago
They are not losing money on subscription plans. Inference is very cheap - just a few dollars per million tokens. What they’re trying to do is bundle R&D costs with inference so they can fund the training of the next generation of models. Banning third-party tools has nothing to do with rate limits. They’re trying to position themselves as the Apple of AI companies -a walled garden. They may soon discover that screwing developers is not a good strategy. They are not 10× better than Codex; on the contrary, in my opinion Codex produces much better code. Even Kimi K2.5 is a very capable model I find on par with Sonnet at least, very close to Opus. Forcing people to use ONLY a broken Claude Code UX with a subscription only ensures they loose advantage they had.
- rjh29 9mo ago
  > "just a few dollars per million tokens" Google AI Pro is like $15/month for practically unlimited Pro requests, each of which take million tokens of context (and then also perform thinking, free Google search for grounding, inline image generation if needed). This includes Gemini CLI, Gemini Code Assist (VS Code), the main chatbot, and a bunch of other vibe-coding projects which have their own rate limits or no rate limits at all. It's crazy to think this is sustainable. It'll be like Xbox Game Pass - start at £5/month to hook people in and before you know it it's £20/month and has nowhere near as many games.
  - harrall 9mo ago
    OpenAI only released ChatGPT 4 years ago but… Google has made custom AI chips for 11 years — since 2015 — and inference costs them 2-5x less than it does for every other competitor. The landmark paper that invented the techniques behind ChatGPT, Claude and modern AI was also published by Google scientists 9 years ago. That’s probably how they can afford it.
    - illiac786 9mo ago
      I agree that the TPUs are one of the things that are underestimated (based on my personal reading of HN). Google already has a huge competitive advantage because they have more data than anyone else, bundle Gemini in each android to siphon even more data, and the android platform. The TPUs truly make me believe there actually could be a sort of monopoly on LLMs in the end, even though there are so many good models with open weights, so little (technical) reasons to create software that only integrates with Gemini, etc. Google will have a lion‘s share of inferring I believe. OpenAI and Claude will have a very hard time fighting this.
dcre 9mo ago
Why do you think they're losing money on subscriptions?
- Yossarrian22 9mo ago
  Because they're not saying they are making a profit
  - mikeg8 9mo ago
    That doesn’t mean that the subscription itself is losing money. The margin on the subscription could be fine, but by using that margin to R&D the next model, the org may still be intentionally unprofitable. It’s their investment/growth strategy, not an indictment of their pricing strategy.
    - Wobbles42 9mo ago
      They have investors that paid for training of these models too. It could be argued that R&D for the next generation is a separate issue, but they need to provide a return on the R&D in this generation to stay in business.
      - KeplerBoy 9mo ago
        The return of R&D can just be an inflated valuation, there's no immediate need to make actual money.
- andersmurphy 9mo ago
  Does a GPU doing inference server enough customers for long enough to bring in enough revenue to pay for a new replacement GPU in two years (and the power/running cost of the GPU + infrastructure). That's the question you need to be asking. If the answer is not yes, then they are making money on inference. If the answer is no, the market is going to have a bad time.
fulafel 9mo ago
Depends on how you do the accounting. Are you counting inference costs or are you amortizing next gen model dev costs. "Inference is profitable" is oft repeated and rarely challenged. Most subscription users are low intensity users after all.

by paxys 9mo ago

Someone1234 9mo ago

I agree; unfortunately when I brought up that they're losing before I get jumped on demanding me to "prove it" and I guess pointing at their balance sheets isn't good enough.

sambull 9mo ago

The secret is there is no path on making that back.

JimmaDaRustla 9mo ago
My crude metaphor to explain to my family is gasoline has just been invented and we're all being lent Bentley's to get us addicted to driving everywhere. Eventually we won't be given free Bentley's, and someone is going to be holding the bag when the infinite money machine finally has a hiccup. The tech giants are hoping their gasoline is the one that we all crave when we're left depending on driving everywhere and the costs go soaring.
- eru 9mo ago
  Why? Computers and anything computer related have historically been dropping in prices like crazy year after year (with only very occasional hiccups). What makes you think this will stop now?
  - adrianN 9mo ago
    Cars have also been dropping in price.
    - sciencejerk 9mo ago
      Evidence for this claim?
      - adrianN 9mo ago
        A few generations ago almost nobody could afford a car, now many low income families afford two.
        sciencejerk 9mo ago
        Maybe cars are not cheaper, just easier to finance due to the modern credit systems?
      - fatherwavelet 9mo ago
        I had a 1990 Ford Taurus as my first car. I had got it used and I remember it being completely impossible to afford a new car at the time. It was sticker price of $33,000 adjusted for inflation: https://en.wikipedia.org/wiki/Ford_Taurus_%28second_generation%29#/media/File:Ford_Taurus_--_07-09-2009.jpg https://en.wikipedia.org/wiki/Ford_Taurus_%28second_generati... I don't think it would even feel safe to drive at all compared to what we have got use to with modern cars. It broke down 3 times while I had it and stranded me on the road. No cell phone of course to call anyone. These were the mythic "good ol days".
    - Wobbles42 9mo ago
      And knives apparently. I recently encountered this randomly -- knives are apparently one of the few products that nearly every household has needed since antiquity, and they have changed fairly little since the bronze age, so they are used by economists as a benchmark that can span centuries. Source: it was an aside in a random economics conversation with charGPT (grain of salt?). There is no practical upshot here, but I thought it was cool.
      - sarchertech 9mo ago
        Yeah I’d definitely take that knife thing with a grain of salt. I have most of a history degree, took a lot of Econ classes (before later going back for CS), and it’s a topic I’m very interested in and I’ve never heard that (and some digging didn’t find anything). It’s also false that the technology has changed very little. The jumps from bronze to iron to steel to modern steel and sometimes to stainless steel all result in vastly different products. Not to mention the advances in composite materials for handles. Then you need to look at substitute goods and the what people actually used knives for. A huge amount of the demand for knives evaporated thanks to societal changes and substitute goods like forks. A few hundred years ago the average person had a knife that was their primary eating utensil, a survival tool, and a self defense weapon. Knives like that exist today but they’re not something every household has or needs. This is a good example of why learning from ChatGPT is dangerous. This is a story that sounds very plausible at first glance, but doesn’t make sense once you dig in.
  - walterbell 9mo ago
    Recent price trends for DRAM, SSDs, hard drives?
    - aftbit 9mo ago
      Short term squeeze, because building capacity takes time and real funding. The component manufacturers have been here before. Booms rarely last long enough to justify a build-out. If AI demand turns out to be sustained, the market will eventually adapt by building supply, and prices will drop. If AI demand turns out to be transient, demand will drop, and prices will drop.
  - shykes 9mo ago
    Commodity hardware and software will continue to drop in price. Enterprise products with sufficient market share and "stickiness", will not. For historical precedent, see the commercial practices of Oracle, Microsoft, Vmware, Salesforce, at the height of their power.
    - hugmynutus 9mo ago
      > Commodity hardware and software will continue to drop in price. The software is free (citation: Cuda, nvcc, llvm, olama/llama cpp, linux, etc) The hardware is *not* getting cheaper (unless we're talking a 5+ year time) as most manufacturers are signaling the current shortages will continue ~24 months.
      - denimnerd42 9mo ago
        GB300 NVL72 is 50% more expensive than GB200 I've heard.
      - eru 9mo ago
        > The hardware is not getting cheaper (unless we're talking a 5+ year time) Yes, that's the time I'm talking about. You also had a blip with increasing hard disk prices when Thailand flooded a few years ago.
      - shykes 9mo ago
        > The software is free (citation: Cuda, nvcc, llvm, olama/llama cpp, linux, etc) If you factor in the cost of integration and ongoing maintenance - by humans or llms - it is not free. But it certainly has never been cheaper.
  - CamperBob2 9mo ago
    In the GP's analogy, the Bentley can be rented for $3/day, but if you want to purchase it outright, it will cost you $3,000,000. Despite the high price, the Bentley factory is running 24/7 and still behind schedule due to orders placed by the rental-car company, who has nearly-infinite money.
  - Wobbles42 9mo ago
    It has stopped. Demand is now rising faster than supply in memory, storage and GPUs. We see vendors reducing memory in new smart phones in 2026 vs 2025 for example. At least for the moment falling consumer tech hardware prices are over.
    - HDThoreaun 9mo ago
      Memory and storage has always been very cyclical. This is nothing new
  - Ekaros 9mo ago
    On consumer side looking at a few past generations I question that. I would guess that we are nearing some sort of plateau there or already on it. There was inflation, but still not even considering RAM prices from last jump gains relative to cost were not that massive.
  - JimmaDaRustla 9mo ago
    Please show me where any AI company is currently turning a profit with their current offering and price structure, then let's have that conversation.
- rizky05 9mo ago
  [dead]
- echelon 9mo ago
  I like this analogy. I also think we're, as ICs, being given Bentleys meanwhile they're trying to invent Waymos to put us all out of work. Humans are the cost center in their world model.
snihalani 9mo ago
how do I understand what is the sustainable pricing?
stingrae 9mo ago
the path is by charging just a bit less than the salary of the engineers they are replacing.
- nananana9 9mo ago
  After hearing this 10 times a day for the last 5 years I'm starting to get a bit tired. Do you have a rough time for when this great replacement is coming? 1 year? 2? 5? If it's longer than that can we shut up about it for a few years please.
  - stingrae 9mo ago
    It’s happening already? Ask any new CS grads about how good the job market is.
    - shimman 9mo ago
      A poor economy that is still dealing with a decade+ of ZIRP, COVID shock, tariffs, and political strife; I don't see how AI has much, if anything, to do with this when compared with other options. If AI was truly this productive they wouldn't be struggling so hard to sell their wares.

mattas 9mo ago

The question I have: how much are they _also_ losing on per-token billing?

imachine1980_ 9mo ago
From what I understand, they make money per-token billing. Not enough for how much it costs to train, not accounting for marketing, subscription services, and research for new models, but if they are used, they lose less money. Finance 101 tldr explanation: The contribution margin (= price per token -variable cost per token ) this is positive Profit (= contribution margin x cuantity- fix cost)
- andersmurphy 9mo ago
  Do they make enough to replace their GPUs in two years?
  - imachine1980_ 9mo ago
    if 100% of the money they spend is in inference priced by tokens (they don't say about subscriptions so i asume they lost money), yes they make money, but their expenses are way higher than inference alone. so they can make the gpu cost if they sell tokens but in reality this isnt the case, becouse they have to constaly train new models, subscription marketing, R&D, And overhead. antropic in general lost way less money than their competitors i will take this number in particular the projected break even but googling say Gross margin in this case is how much money they do whit the GPU " Gross Margins: Projected to swing from negative 94% last year to as much as 50% this year, and 77% by 2028. Projected Break-even: The company expects to be cash flow positive by 2027 or 2028. " i will not be as bullish to say they will no colapse (0 idear how much real debt and commitments they have, if after the bubble pop spending fall shraply, or a new deepseek moment) but this sound like good trajectory (all things considered) i heavily doubt the 380 billions in valuation "this is how much is spendeed in developers between $659 billion and $737 billion. The United States is the largest driver of this spending, accounting for more than half of the global total ($368.5 billion in 2024)" so is like saying that a 2% of all salaries of developers in the world will be absorbed as profit whit the current 33.3 ratio, quite high giving the amount of risk of the company.

croes 9mo ago

But why does it matter which program you use to consume the tokens? The sounds like a confession that claude code is somewhat wasteful at token use.

airstrike 9mo ago
No, it's a confession they have no moat other than trying to hold onto the best model for a given use case. I find that competitive edge unlikely to last meaningfully in the long term, but this is still a contrarian view. More recently, people have started to wise up to the view that the value is in the application layer https://www.iconiqcapital.com/growth/reports/2026-state-of-ai-bi-annual-snapshot https://www.iconiqcapital.com/growth/reports/2026-state-of-a...
- croes 9mo ago
  But if more users use your service you get an advantage. Letting the users chose their tool for that would be a good thing.

hannasm 9mo ago

Honestly I think I am already sold on AI, who is the first company that is going to show us all how much it really costs and start enshitification? First to market wins right?

mirzap 9mo ago

They are not losing money on subscription plans. Inference is very cheap - just a few dollars per million tokens. What they’re trying to do is bundle R&D costs with inference so they can fund the training of the next generation of models. Banning third-party tools has nothing to do with rate limits. They’re trying to position themselves as the Apple of AI companies -a walled garden. They may soon discover that screwing developers is not a good strategy. They are not 10× better than Codex; on the contrary, in my opinion Codex produces much better code. Even Kimi K2.5 is a very capable model I find on par with Sonnet at least, very close to Opus. Forcing people to use ONLY a broken Claude Code UX with a subscription only ensures they loose advantage they had.

rjh29 9mo ago
> "just a few dollars per million tokens" Google AI Pro is like $15/month for practically unlimited Pro requests, each of which take million tokens of context (and then also perform thinking, free Google search for grounding, inline image generation if needed). This includes Gemini CLI, Gemini Code Assist (VS Code), the main chatbot, and a bunch of other vibe-coding projects which have their own rate limits or no rate limits at all. It's crazy to think this is sustainable. It'll be like Xbox Game Pass - start at £5/month to hook people in and before you know it it's £20/month and has nowhere near as many games.
- harrall 9mo ago
  OpenAI only released ChatGPT 4 years ago but… Google has made custom AI chips for 11 years — since 2015 — and inference costs them 2-5x less than it does for every other competitor. The landmark paper that invented the techniques behind ChatGPT, Claude and modern AI was also published by Google scientists 9 years ago. That’s probably how they can afford it.
  - illiac786 9mo ago
    I agree that the TPUs are one of the things that are underestimated (based on my personal reading of HN). Google already has a huge competitive advantage because they have more data than anyone else, bundle Gemini in each android to siphon even more data, and the android platform. The TPUs truly make me believe there actually could be a sort of monopoly on LLMs in the end, even though there are so many good models with open weights, so little (technical) reasons to create software that only integrates with Gemini, etc. Google will have a lion‘s share of inferring I believe. OpenAI and Claude will have a very hard time fighting this.

dcre 9mo ago

Why do you think they're losing money on subscriptions?

Yossarrian22 9mo ago
Because they're not saying they are making a profit
- mikeg8 9mo ago
  That doesn’t mean that the subscription itself is losing money. The margin on the subscription could be fine, but by using that margin to R&D the next model, the org may still be intentionally unprofitable. It’s their investment/growth strategy, not an indictment of their pricing strategy.
  - Wobbles42 9mo ago
    They have investors that paid for training of these models too. It could be argued that R&D for the next generation is a separate issue, but they need to provide a return on the R&D in this generation to stay in business.
    - KeplerBoy 9mo ago
      The return of R&D can just be an inflated valuation, there's no immediate need to make actual money.
andersmurphy 9mo ago
Does a GPU doing inference server enough customers for long enough to bring in enough revenue to pay for a new replacement GPU in two years (and the power/running cost of the GPU + infrastructure). That's the question you need to be asking. If the answer is not yes, then they are making money on inference. If the answer is no, the market is going to have a bad time.

fulafel 9mo ago

Depends on how you do the accounting. Are you counting inference costs or are you amortizing next gen model dev costs. "Inference is profitable" is oft repeated and rarely challenged. Most subscription users are low intensity users after all.