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Expect to see more of these kinds of announcements as companies need to start showing returns on their AI investments. It's hard to say how subsidized the curre
by AlexandrB 6mo ago
Expect to see more of these kinds of announcements as companies need to start showing returns on their AI investments. It's hard to say how subsidized the current AI products are[1] but we're definitely getting a free lunch at VC's expense the moment.
[1] Ed Zitron speculates the actual prices with token based billing for heavy users will be something like 10x the subscription price, but this seems high.
- Leynos 6mo agoNot that I give much credence to anything Zitron says, but the amount of inference you can get on a £200 a month OpenAI or Anthropic subscription is easily an order of magnitude more than what you'd get paying the same amount at subscription rate. Although I would also point out that OpenAI recently tripled the amount of Codex inference you get per month for £200 (and to head off the suggestion, this is distinct from their current 2x promotion on £100/month plans)
- paulddraper 6mo ago*more than what you'd get paying the same amount at usage rate.
- Leynos 6mo agoYes, thanks. Too late to edit now, sadly.
- PunchyHamster 6mo ago> Not that I give much credence to anything Zitron says, but the amount of inference you can get on a £200 a month OpenAI or Anthropic subscription is easily an order of magnitude more than what you'd get paying the same amount at subscription rate. Neither of those is how much it actually costs the company selling the service. And I have feeling they are running at loss here so the play is "get everything possible using LLMs then jack up the pricing"
- semiquaver 6mo agoThere have been plenty of studies which indicate that inference considered by itself is almost certainly quite profitable at all the frontier labs. The problem is amortizing the cost of all the expensive training runs required to train new models into the revenue stream.
- pkaye 6mo agoDoes that mean those running the open models are highly profitable since they don't have to do any training?
- polski-g 6mo agoYes obviously, otherwise they wouldn't be doing it; they'd just go back to mining shitcoins.
- semiquaver 6mo agoI don’t know about highly since they have no moat even more than Antrhropic and OpenAI have no moat. Anyone with a few hundred thousand dollars or sufficient free GPUs can compete with them. So running an open model should earn a market-rate margin.
- o10449366 6mo agoYeah, I'm sure the numbers are a bit inflated compared to API, but with my Claude $200/month subscription I've supposedly consumed 12,160,410,828 tokens in April for a cost of $22,733.03.
- pier25 6mo ago> 10x the subscription price, but this seems high Inference is cheap but training is quite expensive. Plus all the money they've invested and keep investing on hardware, data centers, etc. And evidently they also need to make a profit at some point.
- xienze 6mo ago> Inference is cheap Maybe from the perspective of traditional, turn-based chat. But when you start having developers command an army of agents that work around the clock, those cheap tokens start adding up fast...
- mbb70 6mo agoIf the unit-economics work out and they can sell $0.99 of tokens for $1.00, doesn't matter how many agents you spin up. The flat rate subscriptions can't last though.
- xienze 6mo ago> If the unit-economics work out and they can sell $0.99 of tokens for $1.00 I think the margins have to be a lot higher than that in order to give investors the return they're expecting, to continue the never-ending training treadmill, and to build more and more datacenters to accommodate people basically DDOS'ing the GPUs in order to run their workloads. Yes, in theory what you said makes sense. But the tightrope these companies have to walk is that the per-token costs still have to be low enough that developers and companies don't just say "ehhh I guess we can still do all this work the old-fashioned way" but ALSO high enough to cover the massive expenses AND astronomical returns everyone's expecting.
- maccard 6mo agoVC investment isn’t about margins, it’s about finding a unicorn. It doesn’t matter if margins are negative if your product is dominant in the market as you can fiddle with the margins after the fact. You just need to be invested long enough to see everyone else fail.