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Gen AI is unprofitable, especially at the insanely cheap rates they've been offering to get people in the door. So expect more increases in the future.
by LetsGetTechnicl 5mo ago
Gen AI is unprofitable, especially at the insanely cheap rates they've been offering to get people in the door. So expect more increases in the future.
- GaggiX 5mo agoIf you don't need SOTA or near SOTA there are plenty of dirt cheap models, just look at Gemma 4 31B on Openrouter.
- ai_fry_ur_brain 5mo ago[flagged]
- Gigachad 5mo agoFor all of the use cases being hyped you really do, and you actually need something much better than the SOTA models to do what we are being told can be done. The small models are useful for small things like summarizing text or search but not much else.
- LetsGetTechnicl 5mo agoYeah a lot of AI hype is look at the amazing new thing our new model can do! Like Google at this event. But when pressed about its pricing reality the answer is “use a worse cheaper model”?? Real convincing argument there
- GaggiX 5mo agoIf don't want to spend 1.5$/9$ for the lastest model then yes use a cheaper model, DeepSeek V4 Flash is 0.11$/0.22$ on OpenRouter and it's more capable than the most expensive model a year ago. Models have never been so cheap given their capabilities unless you want to follow the SOTA (where the hype is).
- scrollop 5mo agoYou mean Kimi or qwen
- npn 5mo agoIt is insanely profitable though, if you cut out r&d cost, plus the marketing and loss leaders. Don't let them gaslight you. Even anthropic who does not own any hardware still have a big margin providing claude models.
- LetsGetTechnicl 5mo agoThen why haven't they reported any profits using GAAP (generally accepted accounting principles)? They all use ARR which is easily gamed.
- npn 5mo agoI don't really sure, but might be they count hardware purchase as loss, too. Google has just recently upgraded their TPUs.
- overrun11 5mo agoThey aren't profitable on a GAAP basis and no one claims this. This obsession over profits is misguided. These are hyper growth companies growing at a scale never seen before. It is both deliberate and uncontroversial to invest in growth rather than slowing down to produce profits.
- chillfox 5mo agoIf my retirement money is going to end up invested in these companies, either directly when they IPO or indirectly through compute providers, then I would like to see some proof that they are capable of producing profits. "Trust me bro" just ain't gonna cut it.
- timmytokyo 5mo agoEverything is insanely profitable if you ignore the costs.
- operatingthetan 5mo agoThey immediately undercut their argument to the point that I'm not sure if they were being sarcastic.
- roadside_picnic 5mo agoThese companies are unprofitable (as all companies at this stage and ambition should be) but I increasingly don't see any justification for the idea that it is fundamentally unprofitable. Inference alone is certainly profitable. I'm running models at home that are comparable to performance of paid models a year or so ago for free. Even for much larger models the cost around inference serving are clearly manageable. Training is where the costs are, but I'm increasingly convinced those too could have costs dramatically reduced if necessary. Chinese companies like Moonshot.ai are doing fantastic work training frontier models for a fraction of the cost we're seeing from Anthropic/OpenAI. This isn't like Uber or Doordash where the economics fundamentally don't make sense (referring to the early days of these services where rates were very cheap). It's a compelling story that "current AI is unsustainable", but it doesn't pan out in practice for a multitude of reasons (not the least of which is that we can always fall back to what models did last year for basically free).
- ReliantGuyZ 5mo agoAnd if you can run those strong models at home for free, why would hosting them be a successful business for any of these providers? Profitable maybe, in terms of having low costs, but why pay Google or whoever when you can do it yourself for cheaper/"free"?
- HDThoreaun 5mo agoIf you can run your server at home for free why would hosting it be a successful business for any of these propviders?
- baq 5mo agoFor free == with a huge upfront cost of getting a good enough box and running costs of maintaining it and just keeping it powered. By the time it pays off the frontier labs are three generations ahead at least. Compare with on-demand billing per token and it just doesn’t make sense to own the hardware if you aren’t using it productively or renting it out for 95% of the time.
- LetsGetTechnicl 5mo ago
- Rekindle8090 5mo ago[dead]