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> Oh! What’s his reputation? The people who are completely sold on the belief that AI providers are running at a profit believe him to be utterly, totally and

> Oh! What’s his reputation? The people who are completely sold on the belief that AI providers are running at a profit believe him to be utterly, totally and completely wrong in every one of his predictions. The people who are completely sold on the belief that AI providers are running at a loss they can never recover from believe him to be utterly, totally and completely correct in every one of his predictions. The reality is that it's not his predictions that matter, but his data, which is almost always correct as of time of writing. If you ignore his opinions, the data presented on liabilities, spend, revenue, loans, commitments, etc across Coreweave, Stargate, Oracle and all of the usual AI companies is, as far as I can tell, correct. IOW, when it comes to his opinions, it's all about your priors. His data is good, though.

disgruntledphd2 4mo ago
> The reality is that it's not his predictions that matter, but his data, which is almost always correct as of time of writing. If you ignore his opinions, the data presented on liabilities, spend, revenue, loans, commitments, etc across Coreweave, Stargate, Oracle and all of the usual AI companies is, as far as I can tell, correct. Yeah, I think that he does well with sources and data. I also think that his editorialising can be off-putting for lots of people. I kinda enjoy it, but accept that I have niche tastes.
- simianwords 4mo ago
  > Yeah, I think that he does well with sources and data He's not even good at that, here's him not understanding what ARR means and fumbling a simple calculation and refusing to fix it. https://x.com/binarybits/status/2031392856401666362 https://x.com/binarybits/status/2031392856401666362 Not only not understanding ARR, he simply doesn't do data analysis properly - he misses some few months and days in his calculation to prop up his point. This is a mistake chatgpt would have caught. https://x.com/binarybits/status/2034377838883700953 https://x.com/binarybits/status/2034377838883700953
  - disgruntledphd2 4mo ago
    > understanding what ARR means Can you share me the official meaning of ARR? Preferably on a GAAP basis. Should be no problem, right?
    - simianwords 4mo ago
      ARR has no official GAAP definition, but is generally understood as the annualized value of a company's current recurring revenue base. This is something Ed clearly doesn't understand https://x.com/edzitron/status/2031124650474852382 https://x.com/edzitron/status/2031124650474852382 And you haven't addressed the fact that he doesn't do simple data calculations - see his blog https://www.wheresyoured.at/the-beginning-of-history https://www.wheresyoured.at/the-beginning-of-history
      - disgruntledphd2 4mo ago
        That's the trouble I have with ARR, because there's no standard, people engage in shenanigans. I do find the 5bn lifetime revenue versus their ARR figures pretty sketchy which is why I really want to see the S1. Can you be more specific on his incorrect calculations please?
        simianwords 4mo ago
        Wait. ARR has no precise definition but has a clear social understanding. It’s clear Ed doesn’t get that and ARR not having a clear definition doesn’t absolve him of the mistake. His misunderstanding was on a different axis. The miscalculations are pretty clearly pointed out in the tweet I linked earlier.
        disgruntledphd2 4mo ago
        > Wait. ARR has no precise definition but has a clear social understanding. This is (historically) a recipe for fraud and badness. If ARR is important enough to be reported, then there should be a GAAP definition. Do you use calendar month or four week rolling? Do you account for seasonality? How do you recognise revenue? (My sense is that Anthropic do sketchy things with credits, as the consumer ones last for like 180 days and then expire). ARR is a really, really, really easy metric to make sound like whatever you want which is why I am sceptical of it. EDIT: I looked at the tweet which is a screenshot of a supposed sheet that Ed built. Unless you have a source for the sheet then I'll need to assign this relatively low credibility (don't know the user, it's a screenshot with no link).
TonyStr 4mo ago
I don't think anyone believes the major AI providers are running at a profit? They are openly investing heavily into R&D and building out infrastructure, and according to these numbers way more than revenue. It wouldn't make sense for any of these companies to run at a profit right now as they're still aggressively expanding. The question is whether they will break even in the future, and capture a large enough market segment to sustain the business, allowing revenue to outgrow costs. If these numbers are real, revenue is already higher than COGS which is a really good signal for them. I think the question is more about whether people believe this is a sound business in the long term, which imo isn't possible to tell based on these numbers yet.
JeremyNT 4mo ago
> The people who are completely sold on the belief that AI providers are running at a loss they can never recover from believe him to be utterly, totally and completely correct in every one of his predictions. It's funny, because you can both believe that these entities are bleeding money on every token and also believe that "financial engineering" will bail them out when they IPO despite this fact. The fundamentals of running a business that sells products or services for more than the cost to produce them seem increasingly decoupled from the financial success of the company and its owners.

disgruntledphd2 4mo ago

> The reality is that it's not his predictions that matter, but his data, which is almost always correct as of time of writing. If you ignore his opinions, the data presented on liabilities, spend, revenue, loans, commitments, etc across Coreweave, Stargate, Oracle and all of the usual AI companies is, as far as I can tell, correct. Yeah, I think that he does well with sources and data. I also think that his editorialising can be off-putting for lots of people. I kinda enjoy it, but accept that I have niche tastes.

simianwords 4mo ago
> Yeah, I think that he does well with sources and data He's not even good at that, here's him not understanding what ARR means and fumbling a simple calculation and refusing to fix it. https://x.com/binarybits/status/2031392856401666362 https://x.com/binarybits/status/2031392856401666362 Not only not understanding ARR, he simply doesn't do data analysis properly - he misses some few months and days in his calculation to prop up his point. This is a mistake chatgpt would have caught. https://x.com/binarybits/status/2034377838883700953 https://x.com/binarybits/status/2034377838883700953
- disgruntledphd2 4mo ago
  > understanding what ARR means Can you share me the official meaning of ARR? Preferably on a GAAP basis. Should be no problem, right?
  - simianwords 4mo ago
    ARR has no official GAAP definition, but is generally understood as the annualized value of a company's current recurring revenue base. This is something Ed clearly doesn't understand https://x.com/edzitron/status/2031124650474852382 https://x.com/edzitron/status/2031124650474852382 And you haven't addressed the fact that he doesn't do simple data calculations - see his blog https://www.wheresyoured.at/the-beginning-of-history https://www.wheresyoured.at/the-beginning-of-history
    - disgruntledphd2 4mo ago
      That's the trouble I have with ARR, because there's no standard, people engage in shenanigans. I do find the 5bn lifetime revenue versus their ARR figures pretty sketchy which is why I really want to see the S1. Can you be more specific on his incorrect calculations please?
      - simianwords 4mo ago
        Wait. ARR has no precise definition but has a clear social understanding. It’s clear Ed doesn’t get that and ARR not having a clear definition doesn’t absolve him of the mistake. His misunderstanding was on a different axis. The miscalculations are pretty clearly pointed out in the tweet I linked earlier.
        disgruntledphd2 4mo ago
        > Wait. ARR has no precise definition but has a clear social understanding. This is (historically) a recipe for fraud and badness. If ARR is important enough to be reported, then there should be a GAAP definition. Do you use calendar month or four week rolling? Do you account for seasonality? How do you recognise revenue? (My sense is that Anthropic do sketchy things with credits, as the consumer ones last for like 180 days and then expire). ARR is a really, really, really easy metric to make sound like whatever you want which is why I am sceptical of it. EDIT: I looked at the tweet which is a screenshot of a supposed sheet that Ed built. Unless you have a source for the sheet then I'll need to assign this relatively low credibility (don't know the user, it's a screenshot with no link).

TonyStr 4mo ago

I don't think anyone believes the major AI providers are running at a profit? They are openly investing heavily into R&D and building out infrastructure, and according to these numbers way more than revenue. It wouldn't make sense for any of these companies to run at a profit right now as they're still aggressively expanding. The question is whether they will break even in the future, and capture a large enough market segment to sustain the business, allowing revenue to outgrow costs. If these numbers are real, revenue is already higher than COGS which is a really good signal for them. I think the question is more about whether people believe this is a sound business in the long term, which imo isn't possible to tell based on these numbers yet.

JeremyNT 4mo ago

> The people who are completely sold on the belief that AI providers are running at a loss they can never recover from believe him to be utterly, totally and completely correct in every one of his predictions. It's funny, because you can both believe that these entities are bleeding money on every token and also believe that "financial engineering" will bail them out when they IPO despite this fact. The fundamentals of running a business that sells products or services for more than the cost to produce them seem increasingly decoupled from the financial success of the company and its owners.