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My understanding is that subscription based inference and API usage is now profitable. Subscriptions are highly profitable for the typical chat user. And API

My understanding is that subscription based inference and API usage is now profitable. Subscriptions are highly profitable for the typical chat user. And API is overall net profitable. What is extremely taxing to their finances is R&D, training and in particular development of frontier models. My assessment is that when the music stops those who have the most subs will win. Companies like Apple who had sat out the battle and built niche moats (privacy), and companies like OpenAI and Anthropic who have the market share will be fine. In 6-12 months, nearly any lead they have will be eaten by distillation. What will then happen is they will lose subscriptions to services which offer AI as a tack on like Gemini with Googles regular cloud subscriptions. This will continue. Companies like Apple will have deep pockets to move on the businesses that go underwater and then can restart training in a much less congested market. All this is assuming a relatively graceful collapse but that is what's likely given how aware everyone is that the bubble must pop. Training costs will fall. Companies like Nvidia and other shovel businesses (i.e. selling GPUs and not using them) mostly have their revenue secured with funding from the present. What I see as confirmations of this pattern is if we stop getting ground busting frontier models and then coast for 3-5 years when competition becomes more incremental. This is an unpopular opinion, Will OpenAI go bust? No chance. Nor will Anthropic.

noduerme 8mo ago
I'm a bit of an Apple optimist for this exact reason. I think the moat is collapsing, and Apple is best positioned to dispatch their own models in a year on their own widely sold consumer hardware, unless someone has a breakthrough which they can't replicate. Which I don't anticipate. I'm not really sure what OpenAI's moat is. Anthropic has a chance being so widely accepted by developers, and being a bit better at developing models when it comes to code.
mrweasel 8mo ago
It probably doesn't matter that subscriptions are profitable, when some estimates put the number of users in the free tier at 96%. I sort of agree with you, not that it's the most subscriptions necessarily that will be the deciding factor, but the there's going to be some companies better positioned to survive when the free money stops. OpenAI has the brand, so that might help, but mostly I think they'll get absorbed into Microsoft. I don't think they can stand on their own. It doesn't seem like a particularly well managed company, so to me it makes more sense that they are simply acquired for pennies on the dollar by someone with better leadership.
- deleted 8mo ago
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- rustyhancock 8mo ago
  > when some estimates put the number of users in the free tier at 96%. It's certainly almost everyone today, but that's because enshitificarion has yet to start properly. The risk to OpenAI is that their free tier are captured by the tack on markets (i.e. Gemini with 2TB of cloud storage). But otherwise they will make free more annoying until people just buy the cheap tier and then move up from there. Like chatgpt Go.
  - piva00 8mo ago
    They will open up to be undercut by players like Gemini that can provide a less-shitty free tier, and capture their market share. I seriously doubt, at this moment, that OpenAI can come up with a offering good enough to entice people to pay for them when there will be other free to use services around. Google seems to be well positioned to eat their lunch.
    - rustyhancock 8mo ago
      Google does indeed. But that ignores that Microsoft is playing the same game. For example in the UK's NHS, the worlds sixth largest employer is now fully committed to Microsoft 365. That's a lot of Copilot money if Microsoft sees it that way. And OpenAI is funded via Microsoft, I also have a Microsoft 2TB subscription. And so do many people have both work based and personal home subscriptions. It's a complete mess of a situation. If Microsoft moves away from GPT (it can since it's advertised under the copilot brand) OpenAI is dead in the water of course.
      - piva00 8mo ago
        Microsoft has already publicly stated they plan to move away from OpenAI [0]. [0] https://www.ft.com/content/f1ec830c-2f08-4b1a-b70f-7330f260753c https://www.ft.com/content/f1ec830c-2f08-4b1a-b70f-7330f2607...

noduerme 8mo ago

I'm a bit of an Apple optimist for this exact reason. I think the moat is collapsing, and Apple is best positioned to dispatch their own models in a year on their own widely sold consumer hardware, unless someone has a breakthrough which they can't replicate. Which I don't anticipate. I'm not really sure what OpenAI's moat is. Anthropic has a chance being so widely accepted by developers, and being a bit better at developing models when it comes to code.

mrweasel 8mo ago

It probably doesn't matter that subscriptions are profitable, when some estimates put the number of users in the free tier at 96%. I sort of agree with you, not that it's the most subscriptions necessarily that will be the deciding factor, but the there's going to be some companies better positioned to survive when the free money stops. OpenAI has the brand, so that might help, but mostly I think they'll get absorbed into Microsoft. I don't think they can stand on their own. It doesn't seem like a particularly well managed company, so to me it makes more sense that they are simply acquired for pennies on the dollar by someone with better leadership.

deleted 8mo ago
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rustyhancock 8mo ago
> when some estimates put the number of users in the free tier at 96%. It's certainly almost everyone today, but that's because enshitificarion has yet to start properly. The risk to OpenAI is that their free tier are captured by the tack on markets (i.e. Gemini with 2TB of cloud storage). But otherwise they will make free more annoying until people just buy the cheap tier and then move up from there. Like chatgpt Go.
- piva00 8mo ago
  They will open up to be undercut by players like Gemini that can provide a less-shitty free tier, and capture their market share. I seriously doubt, at this moment, that OpenAI can come up with a offering good enough to entice people to pay for them when there will be other free to use services around. Google seems to be well positioned to eat their lunch.
  - rustyhancock 8mo ago
    Google does indeed. But that ignores that Microsoft is playing the same game. For example in the UK's NHS, the worlds sixth largest employer is now fully committed to Microsoft 365. That's a lot of Copilot money if Microsoft sees it that way. And OpenAI is funded via Microsoft, I also have a Microsoft 2TB subscription. And so do many people have both work based and personal home subscriptions. It's a complete mess of a situation. If Microsoft moves away from GPT (it can since it's advertised under the copilot brand) OpenAI is dead in the water of course.
    - piva00 8mo ago
      Microsoft has already publicly stated they plan to move away from OpenAI [0]. [0] https://www.ft.com/content/f1ec830c-2f08-4b1a-b70f-7330f260753c https://www.ft.com/content/f1ec830c-2f08-4b1a-b70f-7330f2607...