8 ms·
AI's Affordability Crisis
- zoobab 4mo agoSpelling mistake: "a return on these invetment"
- netdevphoenix 4mo agoIt's Proof of (human) Work. Much more useful than having a sticker saying "Done by a Human".
- Insanity 4mo agoAsk your LLM to 'write like a phishing email' to have it seem more human. I'm actually curious if this works, haven't tried but I assume it would.
- netdevphoenix 4mo agoI would imagine no mainstream model allows this easily and at scale for obvious reasons.
- pluralmonad 4mo agoIs deleting a letter after an LLM generated the article an insurmountable task? These quaint signals only screen out the lowest of effort slop writers. Better than absolutely nothing, but barely. It does remind me of the time a chef told me when he puts lemon juice over a dish, he would intentionally not remove any seeds that went on it because it was a signal of quality. I wonder if future slop chefs will intentionally place seeds on dishes that came from a box...
- erikschoster 4mo ago...and "maiinstream" -- seeing glaring typos (easily caught by spellcheck) now makes me wonder: did they decide to leave them in (or add them explicitly) to signal they didn't use AI to write, or (the more paranoid option) did they tell the LLM to add a few typos... I didn't get the sense this was LLM-written, but typo-signalling is... I donno a bit weird. Firefox is underlining some of the words as I write. I'm leaving "donno" unchanged even though it's flagging it as a misspelling but I suppose I'd still opt to fix something like "maiinstream" even at the risk of potentially seeming more LLM-ish!
- simianwords 4mo agoThis is basically bunk because AI costs have gone down by 50x or more (api costs) since 3 years.
- worldsavior 4mo agoWhat?
- claaams 4mo agoHe's saying output for 1M tokens on the latest models is $50 now when it used to be $2500.
- whateveracct 4mo agoso how are these labs going to recoup the insane training costs at those prices? even if there is still a fat margin leftover afterwards
- mynameisbilly 4mo agoThey also have to continuously train, forever, to avoid model drift. It's not a one and done thing as far as I'm aware.
- esseph 4mo agoDiminishing returns without some major efficiency gains.
- josefritzishere 4mo agoCan you cite a source? Everything I've read describes the costing as linear with growth.
- simianwords 4mo agohttps://simianwords.bearblog.dev/conclusive-proofs-that-llm-costs-are-going-down/ https://simianwords.bearblog.dev/conclusive-proofs-that-llm-...
- jschveibinz 4mo agoI don't have a crystal ball, but based on similar historical scenarios, I think that one or two of these companies will win--probably because of some unique application, delivery or trade secret that will drive 80% of their revenue. Consider Google, Apple, Amazon, etc. It's still early days...
- com2kid 4mo agoSo long as Chinese labs keep writing white papers, trade secrets aren't going to win the day. Having growth up in the 90s, it is weird seeing companies share their technology secrets publicly.
- dofm 4mo agoWandering around pretending to be researchers who are only just figuring out how to make money is, for the short term, an incredibly good way to attract a load of naïve money; not all sharks are smart. And it does, nowadays, give you a bit of a veneer of mere curiosity when you're being accused of massive theft.
- mike_hearn 4mo agoThe papers are often missing many critical details.
- CuriouslyC 4mo agoThe US govt is going to ban foreign models and foreign providers, and frontier labs are still cooked, because US companies will RLwash Chinese models to try and get in on the captive market. The frontier labs have already lost the war for coding, their next play is custom models for specific domains... Anthropic Galen for biomedical research, Anthropic Locke for legal analysis, etc, and you won't see _ANY_ intermediate work on the model, you will put in query, maybe get some questions fired back during work, and get a "final report." Eventually the frontier labs will try to cut out the middle man once these models prove themselves and start doing partnerships with big firms in the domains, so they can take a % of the profits in perpetuity rather than just taking a one time payment. For example, after Anthropic Galen, they'll do a partnership with Pfizer to generate Ozempic-Superjacked and take 20% royalties on global sales.
- SirFatty 4mo ago"Crisis"
- NitpickLawyer 4mo agoThe Token Tension :)
- deleted 4mo ago[deleted]
- yashthakker 4mo ago[flagged]
- trollbridge 4mo agoThe article fails to mention DeepSeek, Alibaba, Qwen, Xiaomi, MiMo, z.ai, or GLM. It's hard to take such an article seriously that doesn't do this. (Our monthly total spend is around $180 with a team of 6, about half technical; our biggest line items are for American models or subscriptions which we probably will be planning to get rid of.) And then remarks like this: Anthropic, OpenAI and Microsoft have all now transitioned customers from subscriptions to token-based pricing. Huh? I use OpenAI via a subscription, as is anyone else using GPT-5.5-Pro who isn't a multimillionaire.
- junior44660 4mo ago> Our monthly total spend is around $180 with a team of 6, about half technical; our biggest line items are for American models or subscriptions which we probably will be planning to get rid of.) Please tell more :). Do you pay per token from bedrock / openrouter / somewhere else? How many tokens you use over the month, and how many for each task? Which harnesses?
- stavros 4mo agoNot the GP, but I use Opus for planning, Deepseek for actual coding (implementing the plan) and GPT for review. GPT is inexhaustible on the $20/mo plan, Deepseek is dirt cheap (maybe $10/mo) and Claude is Claude.
- junior44660 4mo agoGP is talking about API / token-based prices, that's why I asked.
- stavros 4mo agoI don't know, he said "subscriptions" in the line items, but eg I use Deepseek via the API.
- junior44660 4mo ago
- knuckleheads 4mo agoShouldn't we know a better answer to these questions once Anthropic's IPO materials surface publicly? I understand, and maybe even expect, SpaceX's materials to be all over the place and skate on by any discussion of unit economics, but the nerds over at Anthropic might just be forthright enough to just tell us what their margin is on tokens as part of their IPO.
- steveBK123 4mo agoWell it probably doesn't help that Dario is going around on podcasts saying things like "frontier labs need $1T of revenue or they will go bankrupt" lol.
- jimbokun 4mo agoDario’s company may be creating super intelligence that will kill us all in the near future, but at least he seems to be brutally honest about all of it.
- manapause 4mo agoThe irony in AI triggering societal collapse due to gross economic malfeasance is just fun to think about. If AI was around in the early 2000s Countrywide.ai would have been a thing.
- wongarsu 4mo agoWhich is just a flashy way to say "we have low margins and lots of overhead". Considering how much they spend on sales, marketing and R&D that doesn't sound that absurd
- steveBK123 4mo agoMy point is that $1T of revenue is A LOT. Apple & Google each only did $400B revenue in 2025. Facebook did $200B. Think of how many decades it took the 3 to get there. So depending on how literally we interpret Darios comment, OpenAI & Anthropic need to get to Apple+Google+Meta revenue numbers in like single digit years?
- HDThoreaun 4mo agoI really can’t stand when writers point to the difference in price per token on the api and subscription and use that as evidence that inference loses money. This author even says it’s implausible that the api charges 4x marginal cost when I think it’s very likely even higher than that. The entire rest of the post sits on this faulty assumption. Fixed costs don’t matter when marginal revenue is profitable and growing rapidly. The ai labs only have 2 questions. Can they prevent users from switching to open source models? Can they scale the number of users on enterprise plans the way they did for coding but in a more general way for all knowledge jobs?
- bcjdjsndon 4mo ago> Can they scale the number of users on enterprise plans the way they did for coding but in a more general way for all knowledge jobs? Do these knowledge jobs have a significant corpus of not only knowledge but discussion and problem solving, all conveniently labelled for the AI to train on? Probably not. Coding has stack overflow, what does, say, advertising use?
- warkdarrior 4mo ago> Coding has stack overflow, what does, say, advertising use? Advertising has centuries of print ads, 100 years of radio advertising, 70 years of TV commercials, etc. And modern AI does not necessarily need labeling.
- bcjdjsndon 4mo agoMy suspicion is coding agents didnt just train on source code but also on human discussions from message boards. There is no equivalent source for this data in advertising... That I know of. Any large scale question and answers boards pertaining to advertising, that have pretty much covered every common query of the past twenty years? If that exists, then I'm wrong.
- HDThoreaun 4mo agoI agree this is a hard problem for the labs. I would be hesitant about “probably not” though. There is just as much marketing copy floating around as there is coding training data. I struggle a bit in this question because I’ve only ever worked as a software engineer, so I can’t exactly make claims about all the work other jobs do. But, one example is I was talking to a doctor friend of mine the other day. He was talking about how he had to take his recertification exam recently and put the questions into chatGPT and thought it gave answers that were generally more thoughtful and correct than his own. Does that mean doctors are done? Of course not, but he’s now pushing hard for more ai tool use in his practice.
- tacone 4mo agoMy take is that Anthropic and OpenAI simply are NOT competing on price. 2 big players are often not enough to create tension on price. Chinese models and open model providers are, indeed, competing on price, and the difference shows.
- rhinoceraptor 4mo agoHow are Anthropic and OpenAI going to compete on price when they're both already deeply unprofitable?
- SpicyLemonZest 4mo agoThey may not be able to! It's pretty widely acknowledged, for example, that if there's some surprising plateau hiding around the corner they're both going to fail. But that could mean that they're overcharging for AI usage to get research money and sustainable rates are lower rather than higher.
- CuriouslyC 4mo agoThe whole hidden plateau hypothesis is kinda bunk, because we're already pretty far in a plateau for general knowledge/question answering, but there are many subdomains where we can push model capabilities, and as we saturate one subdomain we can just shift to another economically valuable one. There isn't one AI intelligence S curve, there are thousands of them, and they're mostly invisible in the major benchmarks, but for someone trying to do work in that specific area of capability, the progress is transformative.
- SpicyLemonZest 4mo agoI'm skeptical of a hidden plateau, but I really think it's overconfident to assume there's not one. Remember that it doesn't even have to be a technical plateau; the effective plateau of e.g. car speeds is determined by regulations and road conditions, and far below what "frontier cars" are capable of on a controlled racetrack.
- fny 4mo agoThe unit economics might be just fine. We'll know more after IPO. The drug dealer analogy has a darker side to it, however. Once your dependent, they can drive up the price just because. It doesn't need to be for existential reasons.
- airstrike 4mo agoIt's a really different market, though. New entrants can easily undercut them if they price too high
- okr 4mo agoAI is a worker for me. That i pay for. Basically i am in the same game now to reduce the prizes i have to pay for my workers. Just like the employers are, that seek to reduce costs for employees, as we are simply too expensive. We need more competition among the workers. Let's introduce more chinese workforce! ;)
- nemomarx 4mo agoIf you had a choice of maybe 3-4 contracting firms to hire workers from and you weren't large enough to negotiate on price I think you'd be in a pet bad spot as a business?
- okr 4mo agoI would say so, yep. I just find it funny, that suddenly i am in the position to find for the cheapest option for my lovely AI workers. While usually me is the one who complains to be underpaid. I am in the same shoe as my employers now.
- dofm 4mo agoAll of the silent, hidden model routing OpenAI does strongly suggests that the unit economics are not just fine, at least not yet. If apparently the only way you can make money with your product this early is to dilute and adulterate it behind the scenes, it strongly suggests you want the customer to continue to believe they are getting value that you can't afford to supply. More prosaically: if either of these firms could prove that they were even really close to profitable on inference, they would have bloomin' said so while they were trying to raise more money.
- steveBK123 4mo agoI think the biggest problem is not necessarily the cost to develop & serve the models, but how quickly user behavior changed with token based pricing. I know a lot of people at companies where the marching orders changed on a dime end of Q1/start of Q2. These are shops that were fully on the "use AI or die (because we will fire you)" train. Now there's monitoring, reporting, alerting not just on overall cost but on "over-use" of best/priciest models based on total-or-percent tokens/dollars, etc. All of this comes with direct developer engagement & standardized management escalation for holding it wrong. To me this customer behavior does not smell like a product you can 10x the pricing on to get profitable. We have exited the exploration phase and now ROI matters.
- piker 4mo agoI.e., the demand for programming tokens turns out to be quite elastic.
- steveBK123 4mo agoI would imagine it only gets worse in the face of good-enough open/chinese/local models too right? Microsoft adding Deepseek support already as I recall? That is - for any definition of "they are behind X months" then eventually they get to the point Claude was in January when the world freaked out, but at 1/10th the cost. A lot of firms are going to mandate that is good enough for their developers.
- sdesol 4mo ago> Microsoft adding Deepseek support I believe this hasn't been confirmed yet but I think it speaks to a bigger problem for the AI companies which is, if you give capable developers a good reasoning LLM, they can make it work like it was a really expensive model. I believe we are 100% at the stage of good enough for the vast majority of tech companines. Fable and others will be more valuable for non-traditional tech companies. I read somewhere that the chinese AI companies are sharing knowledge and it would not surprise me if the government is applying pressure by saying work together or else. If they work together, they can truly commoditize LLMs and with China ramping up hardware support for AI, I see the future being inference speed and hardware being the moat.
- sleepybrett 4mo agoIt's funny when you watch the doomscroll all these anthropic guys talking about how you should be writing self-improving loops and that's all they do. Of course that's all they do, they don't have to pay for their tokens.
- manapause 4mo agoCan confirm, my experience in “loop engineering” was “this is neat” for 45 minutes until a daily ration of tokens was evaporated. The quadratic cost trap is prohibitive to experimentation. As a localLLM evangelist, I am hopeful this will bring more attention to the joys of rolling your own sovereign AI.
- sleepybrett 4mo agoYeah, i'm hoping that gets smoother. I've been experimenting with omlx and opencode on my m5x64gb and keep running into issues w/ Qwen3.6-35B-A3B-MLX-8bit exceeding it's memory limit at the most inopportune times. Playing with 12B gemma4 (8bit) more today. Maybe I should be aiming for something targeting 48gb of memory?
- manapause 4mo agoIt depends what your goals are and what you are using it for. This space is fluid and my answer last week would be different than my answer today! That said there’s no substitute for hard work, here are some resource to get you up to up to speed: https://carteakey.dev/blog/local-inference/local-llm-optimization/ https://carteakey.dev/blog/local-inference/local-llm-optimiz... https://botmonster.com/ai/self-hosted-ai-agent-frameworks-2026/ https://botmonster.com/ai/self-hosted-ai-agent-frameworks-20... Personally I find myself swapping models depending if I am engaged in “trad-development” vs building agentic probes or apps involving imagery. Tailscale the LLM to your deployments and ta-da!
- maxothex 4mo ago[flagged]
- Catloafdev 4mo agoAffordability is not the current goal. Vendor lock-in is the current goal. Consumer prices are a drop in the bucket comparatively.
- dofm 4mo agoLuckily the industry is much too wise, after a couple of decades of cloud infrastructure, to willingly opt to make itself entirely dependent on one of two platforms with opaque and complicated pricing. We've learned our lessons, oh yes
- hk__2 4mo agoThat’s an impossible goal; it’s too easy to switch models.
- downrightmike 4mo agoAnd Microsoft forced M365 subscriptions to include AI for +$30/license. Cheap, but gave them a massive user base they can claim is using AI
- rconti 4mo agoMaybe they just need the competition to run out of funding first?
- woeirua 4mo agoHow can you lock in when the harnesses are basically thin clients around the APIs and you can replicate them using agents in a short period of time? I haven't seen a compelling thesis yet for how you achieve vendor lock in for LLMs. Claude Code is a bit sticky, but if we're being honest its just because Codex doesn't have all the same features yet.
- Catloafdev 4mo agoBecause it's not about consumer lock-in, it's about enterprise lock-in. That's what they're chasing. Regular users are basically marketing.
- GodelNumbering 4mo agoI don't see any real point being made in (or point of) the article. The author sort of just...dumped a bunch of links with the noise that is so incredibly mainstream at the moment that I doubt any of it is news to anyone even somewhat tracking the AI cycle. Most of it (except for maybe the BLS[1] stat) is just regurgitation. [1]: And this too is incorrect, should be " the number of jobs displaced would be around 32.5M" (the post says 32.5K)
- raincole 4mo ago> OpenAI Had $13.07 Billion In Revenue, $34 Billion In Costs and Expenses, and $20.92 Billion In Losses, with a net loss attributable to the company of $38.53 Billion This is going to be the new most misquoted/misunderstood data of the year, isn't it? The cost is mostly from a one-time accounting situation due to their pivot from a non-profit organization.[0] If we trust the leak [1] OpenAI is likely turning profitable this year. [0]: $30Bn of it is the one-time cost. https://www.ft.com/content/e15b0d7e-ff6b-4f16-ba7a-4068feddb828 https://www.ft.com/content/e15b0d7e-ff6b-4f16-ba7a-4068feddb... [1]: I suspect OpenAI itself leaked that financial report. It's almost unbelievably healthy.
- starvar2 4mo agoIt's not like they have an IPO coming... right?
- 827a 4mo ago> Zitron's numbers don't tell us the real cost of generating tokens but, subject to the assumption that the platforms are not subsidizing the token price, that means Anthropic is subsidizing their enterprise customers by up to 40 times, and OpenAI up to 70 times Neither Anthropic nor OpenAI are subsidizing enterprise customers. Neither Anthropic nor OpenAI allow Business nor Enterprise customers access to the high value $200/mo plan. Both organizations have moved to a "cheaper plan per user + API Pricing after that" (e.g. $20/mo + usage). The $100/$200/mo plans are for individuals only (of course, many individuals use these plans at work, but that's beside the point; they aren't selling this plan to enterprises). > SemiAnalysis also analyzed the platform's gross margins, implausibly assuming that tokens were priced at 4 times the cost of generating them and: With the current subsidies, all it takes for a user to have a gross margin of at best negative 25% is for them to use as little as 25% of their rate limit. The article's source for this claim is not SemiAnalysis; its Zitron. But once you dig through his article, Zitron links to a SemiAnalysis tweet [1] where they, as the paragraph states, implausibly assume gross margins of 75% to come up with their weird analysis of the subscription plans. Citing this for anything is weird, because afaik that 75% number is a total shot in the dark. We have no clue what their margins are. My take is that the only reason that 75% number is implausible is because it may underestimate the inference margins of Ant/OAI's API pricing. [1] https://x.com/SemiAnalysis_/status/2064815045767213400?ref=wheresyoured.at https://x.com/SemiAnalysis_/status/2064815045767213400?ref=w...
- bayarearefugee 4mo ago> it may underestimate the inference margins of Ant/OAI's API pricing. If true then why are neither Anthropic or OpenAI dropping their API pricing to gain market share when both are clearly doing all sorts of political and PR maneuvering to compete in a cutthroat market? Since they aren't dropping the API usage prices (and are in fact raising them in a lot of subtle ways) then one of these options almost has to be true: they are still subsidizing inference, training costs are so ridiculously high that they need to make huge profits off inference or collapse in on themselves, or they are price fixing.
- CuriouslyC 4mo ago
- avereveard 4mo ago> Anthropic is subsidizing their enterprise customers by up to 40 times, and OpenAI up to 70 times might as well be the other way around with non subscribed token being 50x overpriced, or any combination thereof also uber was non profitable for the longest time, raking up 31b in losses, on the bet of capturing the market worldwide. scale here is different, but it's also 10 years later, with a lot more volatility and floating cash in the market (voo grew 327% over that period, not unreasonable that round size grew on the same trajectory)
- cmiles8 4mo agoThe math doesn’t add up and the wheels are starting to come off the bus. The conversation in a lot of wealth management offices has shifted dramatically in the last few month from “how do I get in on this AI thing?” to “how do I protect my assets when this AI stuff blows up.” There’s little question now if this will all implode, just when and who’s going to lose their shirt and be left without chairs when the music stops. What’s playing out now is the scene from The Big Short where the banks wouldn’t mark down the value of bonds until they secured a short position. Once the big money has their helmets on it will stop providing fuel for the bubble and then look out below!
- jcgrillo 4mo agoAssuming the analysis is right, and most (or all) of these AI companies will default on their debts, what consequences might that have?
- NickC25 4mo ago>what consequences might that have? All depends on who is holding the bag, and how big the bag is.
- LPisGood 4mo agoProbably 401 (k) plans for the most part.
- thewebguyd 4mo agoHence the IPO. Push the risk on to retail and index funds, away from private credit. Plus Microsoft, Google, and Amazon will also be holding the bag and have huge balance sheet write downs, the compute commitments have not yet been paid for it's all just promises. The banks aren't has exposed this time, as in 2008, most of it is tied up in private credit, its more akin to the fiber buildout in the 90s.
- cmiles8 4mo agoYes, and private credit investors are rushing for the exits but can’t get out because of withdraw limits. It’s starting to get ugly. Folks owning something they think is going to tank and they can’t sell.
- titzer 4mo agoThe coming AI enshittification is going to be epic. For those of us who have been on the web for more than five minutes, we can see this a mile away. If you think search ads are annoying, pre-roll YouTube ads are annoying, streaming ads are annoying, or basically ads-on-any-screen-anywhere-at-any-time are annoying, just wait until every stupid thing is powered by AI and is subtly trying to manipulate you to buy/watch/believe some crap all the time.
- bryanlarsen 4mo agoJeopardizing a $200/month subscription in return for $1/month in ad revenue seems insane. Using ads on a $20/month subscription to entice you into a $200/month one, OTOH...
- titzer 4mo agoThey will almost certainly get more than $1/month in ad revenue for someone interacting with the AI for hours a day.
- asdff 4mo agoIt is already ruining forums including this one. People posting AI slop articles. Probably a good deal of commenters using AI slop to write their comments. Can't run away from it. Eventually you will have to step away entirely because you will just be interfacing mainly with AI content. I'm about fed up with forums at this point and I doubt I will be around them in the coming months at this rate of ever increasing slop peddling. I suspect more and more human contributors will feel the same and start slowly walking away, snowballing the slopification effect. There is going to be a point soon where HN is just ai models posting ai articles to be filled with ai comments and for what reason exactly? I guess to try and train new ai slop company products into the datasets of various ai models to capture the budget spend of some ai middle manager model.
- mannanj 4mo agoWasn't this the end goal in the a totalitarian state in the novels by Orwell and sort of described in the movie Ready Player One? The gist of it as I understand it is in a society where things are fake and incredibly extractive (where a select few, bourgeoisie or rich prioritize their interests over others like we see accelerating today) they limit the forums available for people to question them and peddle their interests on the select few that remain. If you sufficiently isolate the people, it's hard for them to tell whats real and eventually they come to accept the fake narratives as truth. In an odd way, this sort of fits in with the theories about winners writing history, and all those weird, sort of conspiracy-laden accounts of human history having these odd unexplainable gaps or stories around it. I don't know about you, I think we are simply seeing those forces of the past working at preserving their interests and using the latest technology to do it.
- holyknight 4mo agoMost of the "affordability" and "pricing" discussion is pointless because we don't have any real numbers on their margins per token. So, yes, they are subsidizing their subscription plans compared to the API prices, but the API prices could already be stupidly inflated, so the relative price comparison is a nothing burger. Until we know (or at least get a hint) on their margins on API prices, any pricing discussion is pointless.
- kingstnap 4mo agoI don't understand this line of reasoning at all. We have a pretty good idea of how much it costs to serve these models. You can pencil out the economics and guess at the model sizes and we know pretty decently how expensive the hardware is. This like claiming it's meaningless to guess the margins of a restaurant without going into their books and seeing the exact recipets and recipes. They ain't doing dark arts in the back. You can guess at what goes into the food based on similar recipies and how much that costs based on what you pay at the grocery store.
- deleted 4mo ago[deleted]
- evrydayhustling 4mo agoThe willingness to throw capital at AI is definitely doing some crazy things, but this article has some bad takes on the data. > [Ratio of per-token cost to subscription cost] means Anthropic is subsidizing their enterprise customers by up to 40 times, and OpenAI up to 70 times Actually, they could be subsidizing by more (if they are taking a loss on API), or not at all (if they are soaking API customers by a massive margin). Separately, these subscriptions get sold to large groups with varying usage, so it's crazy to model assuming every subscription is maxed out. Banks, gyms, and many other businesses work this way, offering consumers flexible access to services that they will realistically use in bursts. It's not always worth the complexity to prevent overuse by a small minority. You can feel like this kind of business model isn't as transparent, but it's silly to pretend it can't work. > OpenAI spent 44% of their revenue [$5.3B] on sales and marketing! The hype needed to keep the AI bubble inflated is incredibly expensive. Over that same period (2025), OpenAI added $10B in realized revenue and $14B in run-rate. Sounds like they're getting >2X return within 12 months of those go-to-market dollars. Compare that to like, any other business. > Thus in recent weeks the idea that Generative AI (LLMs for short) is too expensive has been all over mainstream business media. Would it be smarter for these companies never to test customers' price tolerance? The quotes following this make it seem like the companies are getting important information about the nature of that price tolerance, and preparing to react. This is the work markets do on both sides to understand the value of a new product. There are lots of good arguments about AI overinflation, but in order for them to be useful, they have to be rigorous and targeted.
- Quarrelsome 4mo agoIs it not also possible that some of the shift is a consequence of increase of use? While we can be extremely cynical at the finances at play, the lock down and increase of token pricing might be demonstrating a burgeoning demand, which would be a positive indicator.
- zytoon 4mo agoThis summarizes half of the entire AI scene as these guys generate content to paint the entire world the way like to: US equity markets are facing three IPOs .. each led by a world-class bullshitter”.
- LastTrain 4mo agoYes. If we spend more on building AI infrastructure then current total global gross software sales, the only way the math works is if we create and sell much more software or if we start charging more for it.
- atleastoptimal 4mo agoThese companies biggest source of revenue is per-token pricing though, not subscriptions. On tokens they make a good margin.
- jdw64 4mo agoI can't go back to a life without AI, and I don't want to. But if AI were billed by token instead of subscription, my monthly cost would probably be ten times what it is now. I could switch to a Chinese model, but I'm not sure how things will look by then. What makes AI so convenient is how good it is at doing red-team code reviews on my work. I used to need all this unnecessary communication just to get a review, but now I only have to reach out to the people I actually want to talk to.
- recursivedoubts 4mo agoOnce locals get to Opus levels I think it we may see a phase change because that + a reasonably competent programmer is going to be a very powerful combination for most practical programming problems. Frontier models may eventually achieve super-intelligence (no opinion beyond mild skepticism) but super-intelligence isn't necessary for most practical day-to-day programming. The problems, as always, become communication, understanding what users really need, etc. that is, softer skills.
- cheonic52749 4mo ago> Frontier models may eventually achieve super-intelligence but super-intelligence isn't necessary for most practical day-to-day programming I think you forgot what super-intelligence means…
- recursivedoubts 4mo agotbh, not sure i ever understood it
- LoganDark 4mo agoA superintelligence is one that exceeds human intelligence in all areas. Which roughly translates to learning, adapting, and performing more quickly and efficiently than even the best humans. This is closely related to "the singularity", which is when technological growth becomes uncontrollable by humanity.
- bryanlarsen 4mo agoThat sounds like a definition designed for goal shifting. This AI is better than human at 99.9% of things, but humans are better at pooping. Therefore we don't yet have a superintelligence.
- LoganDark 4mo agoIf that AI were given an identical human body (and interface to that body) to someone who had not yet learned how to do that, and it outperformed them in figuring it out, then that would settle it. Otherwise I don't see the comparison. If I'm intelligent enough to use a tool, but I don't have the tool, that doesn't mean anyone who does have the tool is automatically more intelligent than me. Likewise, comparing my performance without the tool against someone's performance with the tool wouldn't be benchmarking their performance, only benchmarking them with the tool's performance. The fairer comparison would be against me also with the tool.
- deweywsu 4mo agoI know a lot of level-headed engineers here may not side with me, but I say let the companies who abandoned their people at the drop of a hat, with CEOs who waved their flag around on social media, proudly declaring how they'd now run their companies with 75% fewer employees wither and die. If I had been let go, there's no way I'd go back to a company like that, and there should be a black list of CEOs who acted this way established and kept public. These CEOs are not holistic thinkers, and are too susceptible to mass hysteria and too irresponsible to real people and their lives to be trusted with the vision for any company ever again.
- oreally 4mo agoSomeone should keep track of a public database of CEOs who cut workforce while making huge profits. Name, context, situation and all.
- deadmutex 4mo agoUnfortunately, maintaining an opposite list would probably be easier.
- CamperBob2 4mo agoThat's basically what you'll see if you open a newspaper to the stock page. That's the idea behind business. It's why you have what you have.
- knollimar 4mo agoDepends on if it's shortsighted by giving up your intellectual capital for short term profit.
- SamuelAdams 4mo agoGM just did this in the last 30 days [1], and their sales are likely going to be just fine. In fact the auto industry has repeatedly automated jobs over the last 100 years, and they still make decent sales numbers. If you decided to boycott every company that replaced staff with automation, you would be forced to exit the economy. Every company does this to some degree and the customers who vote with their wallet do not seem to care about a reduction in force. [1]: https://arstechnica.com/ai/2026/06/gm-installs-robots-at-flagship-ev-factory-after-laying-off-1300-workers/ https://arstechnica.com/ai/2026/06/gm-installs-robots-at-fla...
- gizzlon 4mo ago> Sales and Marketing: $5.73 billion .. That is, OpenAI spent 44% of their revenue on sales and marketing! Anyone know what they are spending this on? Can't remember seeing one OpenAI ad.. Is it just pr and influencers? Ads in the US?
- zyuiop 4mo agoLikely free tokens to attract customers
- shaewest 4mo agoI've easily gotten (low) hundreds of OpenAI youtube ads. More recently they've been pushing 'Free OpenAI Image generation' to me, in the past they pushed Codex more, but I have a sub for that now, so I guess it works.
- 9cb14c1ec0 4mo agoIf it actually was spent on ads, it seems to me OpenAI would have to be one of the single biggest ad buyers in the world. Almost certainly they are using a somewhat broad definition of sales and marketing to cram a bunch of expenses into it to make some other category look better.
- chillfox 4mo agoBribes and subsidies is my guess
- wqaatwt 4mo agoThis article seems to be struggling with telling apart the difference between R&D and operating expenses? The fact that AI companies are extremely unprofitable doesn’t mean they are subsidizing token costs, they still can have very decent gross margins on them
- Gigachad 4mo agoThe accounting is all out of whack with these companies. If a GPU had a useful lifespan of around 3 years than it’s more a constant expense than R&D. They want you to believe they can cut the R&D at any time and be profitable but it’s likely they would completely collapse without that spend.
- zhivota 4mo agoI don't see why 3 years is the right number there. I'm using a 10 year old model GPU to generate tokens locally, and given the bottlenecks, a commercial model focused on RAM and transfer speeds should have a longer depreciation curve than 3 years.
- Gigachad 4mo agoBecause these GPUs in data centers chew power and take up space. If in 3 years there is a new model that processes far more tokens with the same power and time the economics quickly say the hardware is cheaper to replace than to continue running. As a hobbiest at home the numbers are different and you can afford to do something inefficient.
- wqaatwt 4mo agoFor some time capital costs seem to be dwarfing the operating costs (or at least energy costs) when it comes to GPUs. Of course that will likely change but it might take quite a while (unless the AI bubble violently pops)
- zhivota 4mo agoI still challenge it. After 3 years an H100 has not depreciated to zero, not even close. Even if you want to replace it, it has considerable residual value.
- chermi 4mo agoLol I feel like no one has any attention span here. Tech shit is expensive in the beginning when it's new. It gets cheaper with time. This is a tech forum, don't we know this? Of course people overreact in both directions on both sides of the issue. It's a very fast technology, wait for things to settle before making grand declarations.
- dualvariable 4mo agoYeah, but in the short-term there's $600B/yr of debt-financed depreciating capital investments waiting to financially blow up. If you zoom out to the year 2100, it becomes a little pimple on the economy that is ready to pop, but in the here and now it can cause a lot of damage to real people's wages and finances over the next 3 years.
- nemomarx 4mo agoLots of stuff in the zirp era was cheap when it was new and increased in price over time though. Look at grubhub fees or etc.
- akazantsev 4mo ago> Lol I feel like no one has any attention span here. Tech shit is expensive in the beginning when it's new. It gets cheaper with time. The funniest comment here. Have you seen the prices of the technical shit for the past two years? Dang, GPUs are not getting any cheaper, but more expensive with each year.
- SwellJoe 4mo agoThat's an artificially inflated market. OpenAI and xAI bought everything for like two years into the future, partly to inflate the AI bubble, partly to lock-in a monopoly on the kinds of compute you need for AI, and partly to scale up actual operations. They can't realistically keep buying all the RAM in the world forever, the money has to run out eventually (though the market can remain irrational for quite a long time and can keep giving OpenAI and Apartheid Clyde money well past the point of reason).
- anthonypasq 4mo ago
- travisb 4mo agoI think a lot of the cost comparisons to employees are off by a factor of 2 or more. AI is the ultimate contractor. Available instantly. Doesn't charge during idle periods. Pre-vetted and pre-trained. No contract negotiations or complex accounting. That is worth a small multiple of the fully-loaded employee cost. So AI might be easily worth more than $200 per human-equivalent hour. With high utilization, that might be $8000-10000 a month. With that kind of spend, AI provider financials looks less frightening.
- ilovecake1984 4mo agoAgree. But if that’s the thinking then you need to compare vs off shore contract rates, not on shore contract rates.
- travisb 4mo agoOff-shore isn't available on the same schedule. My AIntern is available the moment I start my day (not normal for off-shore in a different time zone) _and_ is available after the end of my day when I want it to work after I've gone home (useful for work using scarce resources). It even keeps the context across that time span.
- lbreakjai 4mo agoAI is more like a union that controls the entire labour pool. I'm one out of a few million developers. I've got very limited bargaining power. I can't withdraw my labour because I need it to make rent and buy food. My cost has a very predictable ceiling. On the other hand, there's two AI labs, that could afford to eat your profit, because what are you gonna do? They're your entire labour force.
- bluGill 4mo agoThere are more than two options. The others are not as good, but depending on who you believe they might be good enough.
- mattas 4mo agoI can't wrap my head around how revenue > COGS but at the same time AI is being subsidized and the real cost is not affordable. You don't price based on cost, you price based on willingness-to-pay. So maybe labs are "overcharging" enterprises on interference (because, up til now, enterprises have seemingly had unlimited budget for tokens) and "undercharging" individuals and SMBs (because they don't have an unlimited budget).
- a34729t 4mo agoDeepseek is 90% cheaper, and nearly as good for coding tasks as claude/codex, and as good given the right plan. The only moat OpenAI and Anthropic have is regulation. If the Chinese really eant to hammer us, they could realse the full training data and pipeline.
- thewebguyd 4mo agoEven without doing that the Chinese are already going to impact our labs presence everywhere else in the world. With Fable getting pulled, any model coming out of the US is now unreliable and untrusted. No one in any other country would in their right mind choose OpenAI or Anthropic for anything. The big push for regulation and export controls is only going to ensure OpenAI & Anthropic are more like the automakers. Only in business because of protectionism, left to screw over US consumers meanwhile the rest of the world gets to enjoy cheap EVs
- a34729t 4mo agoI have to push back on this: China's cheap EVs and power prices are due to industrial policy on an epic scale which goes directly against the whole free market thing. I personally think industrial policy is a good thing, but you cannot have it both ways and not expect workers to get unhappy and vote against your interests when they have no more jobs.
- thewebguyd 4mo agoTrue, and its what they are going to do with LLMs as well. We know their playbook by now as they've repeated it over and over again across different industries. But we can still protect domestic workers without screwing over consumers. Pure protectionism doesn't work, it'll only set us back and keep us behind. Just slapping on 100% tariffs or a complete import ban just lets domestic companies get lazy. The protectionism needs an expiry date so they can't hide behind it forever. We could also work to move supply chains out of adversarial nations and into friendly ones, but you know...that requires us to continue to have friends and allies. A fully free market has been an illusion in the US for a very long time. We'd do well to do some of our own state-industrial planning.
- yalogin 4mo agoThe issue is the cost is not going to be a hindrance for companies that have gone all in on the AI development. They may still find it cheaper than hiring engineers and if needed they will layoff a few more. The companies that did not yet jump on this bandwagon and are still evaluating will have a decision to make. No matter what the AI companies are going to change their pricing strategy and it’s going to become a lot lot more expensive to use. I am just hoping the price stays like this until I am done with my big chunk of work
- prymitive 4mo ago[dead]
- qnleigh 4mo agoThe estimate that AI companies need to replace 27% of jobs to service their debt is interesting. But at least Anthropic and Meta seem to have their eyes on replacing software engineers. There are ~1.6M software engineers on the US [0], earning a bit under 150k/year on average [1]. If AI companies captured all of that spend, that amounts to about 250B/year. The article assumed that they need around 300B/year to keep up with their debt. At least based on Meta's recent behavior, forcing 30-50% of developers to switch to data labeling, it looks like that is actually their game plan. [0] https://en.wikipedia.org/wiki/Software_engineering_demographics https://en.wikipedia.org/wiki/Software_engineering_demograph... [1] https://www.indeed.com/career/software-engineer/salaries https://www.indeed.com/career/software-engineer/salaries
- whimsicalism 4mo agoobviating software engineers is effectively AGI-complete and entails obviating most labor in existence .
- hdgvhicv 4mo agoIf that doesn’t happen then open models catch up in months.
- qnleigh 4mo agoI think the concept of "AGI-complete" was interesting but had been falsified. LLMs have jagged intelligence, meaning that they are good at some things while being counterintuitively bad at other things that seem much easier. Especially given that a lot of software engineering can be trained via RL, it's entirely plausible that they will get extremely good at that while lagging in other things.
- whimsicalism 4mo agoOh yeah? Who will be working on rounding out the jaggedness of the LLMs and improving the generalizability of their RL environs, etc.?
- largbae 4mo agoThis article gave me an amusing thought: the only jobs with a high enough salary to be profitably replaced by AI might be software engineers.
- woeirua 4mo agoIt's not an affordability crisis, it's a financial crisis. The models get cheaper super fast. By this time next year Fable 5 will cost less than Sonnet does today. That's not the problem. The problem is that many companies are going to realize that they don't get any ROI from AI. Generating code faster != more profit. Most of the Fortune 500 will likely realize this and then the token budgets will come crashing down. Most of their ideas are _bad_ ideas. Implementing bad ideas faster, won't lead to more profit. Sure, you can use AI to potentially replace software engineers, but the F500 are also terrified of not having accountability or making mistakes. They won't be firing any engineers. In that scenario, there's just no room for AI usage. If you have to be responsible for all the code, then... AI has to either manage it completely autonomously (which even Fable can't) or... humans have to be in the loop which means they still have to understand the code. The best way to understand the code is to write the code yourself. So there's no productivity gain to be had. I'm pro-AI, but I think we're due for a big crash next year.
- KolibriFly 4mo agoI feel like this is way too binary. I don't have to write every line of code myself to understand the system. I don't write my own compiler HTTP stack or database either It's more about the level of abstraction. If AI handles 80% of the grunt work and I spend my time on architecture and reviews that's still a win
- asdff 4mo agoThis works for you because you were trained in The Old Way. Consider the people younger than you. Who are literally shutting their brain off so AI can cheat on their essays and exams. They aren't going to be good architects or code reviewers.
- vjvjvjvjghv 4mo agoThat’s a problem. I work quite a bit with AI now by if I didn’t have a ton of experience writing code myself things would go off the rails quickly. I often have to steer the AI in a different direction from the initial plan it comes up with.
- KolibriFly 4mo agoI feel like the author is jumping way too fast from "OpenAI is losing money" to "the whole AI economy is broken." A company being in the red during aggressive scaling doesn't automatically mean the unit economics don't work.
- dzogchen 4mo ago> To generate the $309 billion needed to service their debt, the AI industry will need to replace 46.8 million jobs, equivalent to around 27% of the current number of jobs in the US. Lump of labour fallacy spotted.
- justincredible 4mo ago[dead]
- 1vuio0pswjnm7 4mo agoHere are all the references in this blog post https://sequoiacap.com/article/follow-the-gpus-perspective/ https://sequoiacap.com/article/follow-the-gpus-perspective/ https://sequoiacap.com/article/ais-600b-question/ https://sequoiacap.com/article/ais-600b-question/ https://www.wheresyoured.at/brokenomics/ https://www.wheresyoured.at/brokenomics/ https://www.wheresyoured.at/exclusive-openai-financials/ https://www.wheresyoured.at/exclusive-openai-financials/ https://www.wheresyoured.at/news-microsoft-to-shift-github-copilot-users-to-token-based-billing-reduce-rate-limits-2/ https://www.wheresyoured.at/news-microsoft-to-shift-github-c... https://archive.is/m5MHe#selection-1483.0-1483.74 https://archive.is/m5MHe#selection-1483.0-1483.74 https://www.youtube.com/watch?v=MNQDrF0HjtI https://www.youtube.com/watch?v=MNQDrF0HjtI https://www.youtube.com/watch?v=VBHSjzHW-C8 https://www.youtube.com/watch?v=VBHSjzHW-C8 https://www.derekthompson.org/p/the-great-ai-cost-panic-of-2026 https://www.derekthompson.org/p/the-great-ai-cost-panic-of-2... https://www.tomshardware.com/tech-industry/artificial-intelligence/ai-cost-crisis-hits-tech-giants-as-employee-tokenmaxxing-backfires-agentic-ai-eats-up-to-1000x-more-tokens-than-standard-ai-sparks-corporate-pullback-at-microsoft-meta-and-amazon https://www.tomshardware.com/tech-industry/artificial-intell... https://www.tomshardware.com/tech-industry/artificial-intelligence/nvidia-exec-says-ai-is-more-expensive-than-actual-workers-yet-some-companies-dont-see-the-extra-costs-as-a-negative https://www.tomshardware.com/tech-industry/artificial-intell... https://blog.dshr.org/2025/10/depreciation.html https://blog.dshr.org/2025/10/depreciation.html https://x.com/ThierryBorgeat/status/2060069195975422281 https://x.com/ThierryBorgeat/status/2060069195975422281 https://wlockett.medium.com/the-ai-industry-is-panicking-db5edfd0b0b1 https://wlockett.medium.com/the-ai-industry-is-panicking-db5... https://www.sofi.com/learn/content/average-salary-in-us/ https://www.sofi.com/learn/content/average-salary-in-us/ https://www.theglobalstatistics.com/united-states-labor-statistics/ https://www.theglobalstatistics.com/united-states-labor-stat... https://www.bls.gov/news.release/pdf/ecec.pdf https://www.bls.gov/news.release/pdf/ecec.pdf https://www.businessinsider.com/ai-bubble-heads-doomers-sam-altman-ai-costs-huge-issue-2026-6 https://www.businessinsider.com/ai-bubble-heads-doomers-sam-... https://www.wsj.com/tech/ai/openai-considers-drastic-price-cuts-anticipating-war-for-users-with-anthropic-9b8c178e https://www.wsj.com/tech/ai/openai-considers-drastic-price-c... https://www.bloomberg.com/opinion/articles/2026-06-11/anthropic-openai-price-war-would-be-brutal-for-both-companies https://www.bloomberg.com/opinion/articles/2026-06-11/anthro... https://arstechnica.com/ai/2026/06/anthropic-pauses-token-based-billing-for-its-claude-agent-sdk/ https://arstechnica.com/ai/2026/06/anthropic-pauses-token-ba... https://x.com/bcherny/status/2040206441756471399?lang=en https://x.com/bcherny/status/2040206441756471399?lang=en https://code.claude.com/docs/en/agent-sdk/overview https://code.claude.com/docs/en/agent-sdk/overview https://windowsforum.com/threads/microsoft-plans-june-30-2026-shift-from-claude-code-to-copilot-cli.425488/ https://windowsforum.com/threads/microsoft-plans-june-30-202... https://www.datacenterdynamics.com/en/news/anthropic-to-use-all-of-spacex-xais-colossus-1-data-center-compute/ https://www.datacenterdynamics.com/en/news/anthropic-to-use-... https://techcrunch.com/2026/06/05/google-will-pay-spacex-920m-per-month-for-compute/ https://techcrunch.com/2026/06/05/google-will-pay-spacex-920... https://backofmind.substack.com/p/tokenalysis-and-john-henry https://backofmind.substack.com/p/tokenalysis-and-john-henry HN commenters quickly attack anything from Ed Zitron these days But this seems to be flying under the radar
- jongjong 4mo agoThe current situation reminds me of how far we've come from old ideals of delaying gratification today in order to have more later. It seems like this ideology has been corrupted into a short-sighted "Establish a monopoly position as soon as possible at all costs, don't worry about tomorrow." It's ironic because monopolizing a sector by investing heavily and suppressing profits used to be a long term move but it seems to have become a short term move as investors are racing each other.
- androiddrew 4mo agoThe over investment by VC means that yeah, they are offering all of this below market rate. It's like Enron where they have to keep the scheme going, and dumping on retail investors is the only thing they can do now. So we are going to go through a big IPO period. Everything will fall apart because VCs already extracted the growth value, and that will show up after the bag has been passed. Things will implode. What survives afterwards is what we will have.
- whimsicalism 4mo agoWhen we say below market rate, what do we mean? The token economics are definitely such that they are charging more than it costs to serve these models with reasonable assumptions on param/activated size.
- androiddrew 4mo agoNo, they are still in the disrupt phase of the strategy. They have enough money to operate at a significant loss. So the play is to heavily subsidize, ingrain until a business can’t function without them. Think Jack Dorsey Thanos snap where 50% of the company is let go. Then jack up prices after a couple years.
- arikrahman 4mo agoDeepseek is practically free if you hit cache. Harnesses like reasonix help to alleviate the affordabiliy concern with opinionated oversight.
- jwrallie 4mo agoThat is an area where the article did not touch, how realistic are token prices with Deepseek and the likes of it? Is it being subsidized?
- arikrahman 4mo agoIt's not subsidized. Openrouter shows multiple providers for the model with American providers like Digital Ocean and Cloudflare. You can run the model yourself and see the unsubsidized cost is the same.
- gexla 4mo agoWhenever I see the cost indicator in my harness while building some probably useless thing, I'm reminded that probably everyone else is doing the same thing. Spending loads of imaginary money (according to the harness, I spent $10 worth of tokens for this single issue, but I have a $20 sub) building something of imaginary value. And then I go on social media and see a wall of slop posts, many talking about skills, systems, agents, and "Karpathy Wiki Systems" to build more useless things. Then I hear about all jobs going to AI, and I figure surely someone has to be the sane one to direct people not to build useless things. Surely you can't leave that up to the AI sales guy. Every single idea I have ever passed by GPT is BRILLIANT! I don't know where I'm going with this. At least it wasn't written by AI. ;) Edit to add: Just use Deepseek Flash 4. You can hit those servers all day for next to nothing and still scratch the itch to build useless things. ;)
- segmondy 4mo agoThe really crisis is that we are now in a phase of ("AGI" or Bust). That's it. Unless we get a self improving autonomous AI heading towards "singularity" then it's all going to blow up. The amount of money invested is ridiculous and would need a long time to recoup. Without AGI, plenty investors are going to start exiting their positions and the entire thing will be drained.
- jcgrillo 4mo agoYes, it's a pyramid scheme. There has been no real tech growth products since Web 2.0/mobile. VR/Metaverse? No. Web3? No. AI is another attempt at a manufacturing a synthetic, viral "growth technology" because we've run out of easy, high-value Web 2.0 eyeballs to mine for "engagement". AI blew up way bigger than web3, and arguably is a little bit less useless, but it's basically made of the same stuff. Unless something fantastic and magical happens. But it won't.
- jwrallie 4mo agoNot a heavy user but I got a feeling for this early since I have a Copilot subscription I get for free as an educator. I used in a day or two the limit that would last me a month. Downgrading from Sonnet to Gemini Flash was the only way to keep the limit longer, and who knows when cheaper models will be discontinued for something more expensive. I don’t know if the prices will remain low, but at least Chinese models being open make them have no control over when it is discontinued, I think learning to work with open models is a good direction, even if not running it on your own hardware.
- wwind123 4mo agoWe used to say genius is 1% inspiration + 99% perspiration. Now we say genius is 1% inspiration + 99% tokens. I was able to enjoy the subsidy from these AI companies to build some projects quickly. Even my wife (non-techie) is able to get a lot of data analysis and processing done once I taught her how to use Codex. We'll just keep enjoying it while it lasts.
- belZaah 4mo agoThere’s one more aspect to this. Look at Claude self-reported availability figures. It’s two nines at best, not enough to build something serious on top of. Historically, adding another 9 is an order of magnitude cost shift. Even in best case scenario, where a LLM scales much differently, you are looking at significant cost increases just to achieve something people would be willing to have their business depend on.
- orcasushi 4mo agoI would say making the model larger and larger will soon reach the "the point of diminishing returns". Even if the model might still get 'smarter' this might not be a good thing because the consumer (us) might not understand at all what the ai is doing. Or it's intelligence will just not be of practical value. After this it will be hardware optimizations and tooling specializations (having different models for different tasks) and running the whole model might not be too expensive anymore. Will they be outcompeted by cheaper Chinese competitors or open models? Possibly. I hope we reach the point I can run the whole darn thing on a old laptop.
- khurs 4mo agoOpenAI is attending the Cannes Ad Festival (the ad industries premium annual event) for the first time this year, alongside the usual ones like Meta and Google. Appears that Chat will remain cheap as it can be supported by Ads revenue, coding tools will go up in price post IPO as less able to squeeze ads in? >“We are clearly in the advertising business now,” https://www.adexchanger.com/ai/at-its-first-ever-cannes-openai-says-we-are-clearly-in-the-advertising-business-now/ https://www.adexchanger.com/ai/at-its-first-ever-cannes-open...
- terekhindc 4mo ago[dead]