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This article tries to build upon a lot of half-truths or incorrect facts, like this: > OpenAI is struggling to monetize. They turned to showing ads in ChatGPT,
by Aurornis 7mo ago
This article tries to build upon a lot of half-truths or incorrect facts, like this:
> OpenAI is struggling to monetize. They turned to showing ads in ChatGPT,
The ads aren’t going into your paid plans (except maybe a highly discounted tier, depending on the market). The ads are a play to offer a free version. Having an ad-supported free tier isn’t new.
The discussion about being unprofitable also repeats the reductionist view that these companies are losing money and therefore the business model doesn’t work. This happens with every VC cycle where writers don’t understand that funded companies are supposed to lose money while they grow. That’s what the investment money is for.
We have very strong indicators that inference is not a money loser for these companies and is likely very profitable. They should be spending large amounts of money on R&D to get ahead and try new things while they’re serving up tokens.
The “but they’re losing money” argument never seems to be brought out against competitors that literally give away their models for free and for which we can calculate the cost of serving 400B-1T parameter open weight models.
- throwaway27448 7mo ago> We have very strong indicators that inference is not a money loser for these companies and is likely very profitable. Why is OpenAI specifically losing money hand over fist then?
- aurareturn 7mo agoTraining. But training costs are a smaller and smaller percentage of revenue as inference revenue grows faster than training costs.
- ainch 7mo agoDo you have any evidence that inference revenue is growing faster than training costs? RLVR is significantly less compute-efficient than token-prediction pretraining - especially as labs are trying to train models to achieve agentic tasks which take tens of minutes per rollout.
- aurareturn 7mo agoI don't have any evidence. You'll have to believe what Anthropic and OpenAI CEOs say publicly. However, it seems to make a lot of sense. Anthropic literally added $6b ARR in February 2026 alone. I doubt training costs go up that fast.
- arctic-true 7mo agoBut this is exactly the problem - we have to take it on faith that inference is profitable because nobody actually knows. It’s hard to even define what that would mean, and while I am suspicious of claims that frontier lab CEOs are just out-and-out liars or bad people, defining and calculating the real cost of inference would be time- and labor-intensive in its own right and there is no strong incentive to do it other than “tech reporters are curious.” Until the IPO, we just won’t know.
- aurareturn 7mo agoA lot of people know. A lot of insiders have been saying tokens are profitable. Is there a conspiracy theory for everyone to lie? Including OpenAI, Anthropic CEOs, employees, Cursor management, inference providers of Chinese models?
- arctic-true 7mo agoProfitable on what basis? They generate more revenue than the cost of electricity? Does that factor in the cost to service the massive, multi-layer cake of debt that was necessary to even begin to serve inference in the first place - not from a training perspective but from a hardware and facilities perspective?
- aurareturn 7mo agoProfitable as in every token they generate, they make some money. And it's already mentioned that the path to profitability is that inference revenue eclipses training costs. It's already happening rapidly.
- Izkata 7mo ago> The ads aren’t going into your paid plans (except maybe a highly discounted tier, depending on the market). The ads are a play to offer a free version. Having an ad-supported free tier isn’t new. Sounds like it is new for ChatGPT though. That's also how it started with TV and Youtube, first on the free tier then expanding to the paid ones.
- carlosjobim 7mo agoYouTube doesn't show ads on the paid plan. If you're talking about sponsored segments those would be impossible to moderate, and YouTube does offer easy skipping of those.
- smt88 7mo agoYouTube, Spotify, and most video steamers have zero ads on paid tiers. I never see video ads.
- monegator 7mo ago> Having an ad-supported free tier isn’t new having ads shoved in paid tiers isn't new either
- raincole 7mo agoAnd it usually doesn't result in a market crash.
- gruez 7mo ago>The “but they’re losing money” argument never seems to be brought out against competitors that literally give away their models for free and for which we can calculate the cost of serving 400B-1T parameter open weight models. To be fair people aren't exactly bullish on the prospects of deepseek or z.ai either, it's just they're below radar so they don't get mentioned.
- Kye 7mo agoZ.ai is at least owned by a public company, so there might be something in the financials. https://en.wikipedia.org/wiki/Z.ai https://en.wikipedia.org/wiki/Z.ai >> "On 8 January 2026, Z.ai held its initial public offering on the Hong Kong Stock Exchange to become a listed company.[24][25][26] It is considered to be China's first major LLM company that went through an IPO.[26] In February 2026, JPMorgan Chase recommended to investors of purchasing stocks of the company alongside MiniMax.[27]" https://www.zhipuai.cn/investor_relations/ https://www.zhipuai.cn/investor_relations/ But I haven't looked into it.
- 14113 7mo ago> companies are supposed to lose money while they grow At what point do we declare that a company has "grown" and now must make money? OpenAI is a multi-billion dollar company right now, surely that's a point at which they should be profitable, instead of propped up by further investment and borrowing. > We have very strong indicators that inference is not a money loser for these companies All of the economic analysis that I've read strongly states the opposite. Running a GPU is a net loss /even for the data centre operators/. For them to break even, they currently charge OpenAI/Anthropic/Etc more than OpenAI/Anthropic/Etc make per-token.
- butlike 7mo agoThey clearly have some vested interest/skin in the game. Not sure it's worth retorting that one.
- butlike 7mo ago> The ads aren’t going into your paid plans (except maybe a highly discounted tier, depending on the market). The ads are a play to offer a free version. Having an ad-supported free tier isn’t new. This statement doesn't discount the original statement: that ads are going into GPT, which Sam called a last resort. > The discussion about being unprofitable also repeats the reductionist view that these companies are losing money and therefore the business model doesn’t work. This happens with every VC cycle where writers don’t understand that funded companies are supposed to lose money while they grow. That’s what the investment money is for. Usually propped-up companies don't last in the long term once the VC subsidy runs out. There's a difference between getting VC money in order to buy rocket parts, and getting VC money in order to charge $7 when you would really need to charge $10. The latter problem never goes away.
- mcv 7mo agoI've heard "They're losing money" since the 1990s. About Amazon and nearly every other tech company. The strategy is always: * Build something useful * Give it away for free to get people exited * Convince investors that this is going to rule the world * Grow to dominate the world * Enshittify
- arctic-true 7mo agoThe difference is switching costs and the viability of alternatives. Even open source models are only a few months behind the frontier labs, which is a long time in tech but practically no time at all in the eyes of a business consumer. At best, one of the frontier labs will survive and get to flex its hegemonic muscle. But billions and billions of dollars worth of investments still get wiped out in that scenario, which I would still qualify as the bubble popping. This would be doubly true if the winner winds up being Google or Microsoft.
- danaris 7mo agoI don't know about others, but with Amazon specifically, it's always been very clear that their "losing money" in aggregate was purely on paper, for tax purposes: their ability to undercut everyone else was initially based on being online without the brick-and-mortar costs that other stores did, then on economies of scale, and now on being the 900kg juggernaut that just has more money than God and can blow it on running you out of business if they feel like it.
- project2501a 7mo ago> This article tries to build upon a lot of half-truths or incorrect facts, like this: yeah i was wondering why my bullshit detector was going off. This feels as if someone who cooks for Ramsey's kitchen is trying to predict the end of the market hike.
- Mentlo 7mo agoWe have strong indicators that inference is profitable on non-economically-valuable prompts. We don't have strong indicators that inference is profitable on economically valuable prompts. As AI companies start extracting rent from the prompting, one of two things are going to collapse - either the long tail revenue base of low-value inference is going to collapse, because people won't be using Chat GPT to get a recipe if it costs them money or if it is ad-ridden; or the cost of economically-valuable inference is going to go up - and whether it goes up to economically stable positions is a toss-up. And I say this as an AI enthusiast with <50% probability of a bubble burst in the short term.