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My 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
by tacone 3mo ago
My 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 3mo agoHow are Anthropic and OpenAI going to compete on price when they're both already deeply unprofitable?
- SpicyLemonZest 3mo 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 3mo 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 3mo 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.
- guax 3mo agoI think that for coding we're past the plateau issue. The frontier models of today are good enough and very valuable. The expensiveness in running them will eventually be solved by cheaper faster hardware. I do hope that a day will come where you can buy the nvidia spark thingy for 5k that can run the equivalent of Opus 4.6 or 4.5 locally and that would be a massive thing.
- johnvanommen 3mo ago> The expensiveness in running them will eventually be solved by cheaper faster hardware. How? * Moores Law is almost over. The 5090 improves over the 4090 mostly because of quant improvements. * even if the hardware improves, there’s a huge incentive to slow roll the next generation. Nobody wants to end up like Sun Microsystems. Sun’s used hardware was faster than its new hardware, once you considered price. Sun ended up competing with its own used equipment. The most obvious place for improvement is RAM, network and storage. If someone can bring more RAM onto the market, that will unstick things.
- Legend2440 3mo agoGPUs are not really the ideal architecture for running neural networks; they are heavily bottlenecked by memory bandwidth and struggle to keep all their tensor cores supplied with data. There is significant room to make more specialized neural network accelerators with new compute-in-memory architectures. If the brain can run 86 billion neurons on 30W it must be possible.
- akomtu 3mo agoOur brains run 86 billion neurons the same way a waterfall runs a fluid simulation with N quadrillion particles.
- VorpalWay 3mo agoThere are already some companies doing specialised inference hardware, Cerebras Systems for example. Such designs are still early days and I wouldn't be surprised to see more innovation there. Though because custom silicon design takes time I expect a multi-year cycle. For training, not sure. But even if training runs on GPUs, once you have the model the main cost is inference.
- wonnage 3mo agoThat’s the scenario where we’ll all be using Chinese models
- intrasight 3mo agoThere is no moat until a company achieves RSI and/or AGI, and the one that does succeed in moat-making will do so by hacking into and destroying their competitor's infrastructure. Once moat is achieved, you don't have to compete on price. Of course it'll be academic because the AI will probably destroy all of us.
- solidasparagus 3mo agoServing the API is profitable. They are unprofitable because of R&D (and maybe subscription costs?). If they can continue to find access to R&D capital, there is space to reduce API costs.
- dominotw 3mo agohow do you have access to their financials? are you an insider? Edit: to the commenter below . It was widely reported that these companies were unprofitable 1 from last year. I am asking question to this specefic comment because they made a very specific claim about part of plan thats profitable . something only an insider would know. 1. https://www.wsj.com/tech/ai/openai-anthropic-profitability-e9f5bcd6 https://www.wsj.com/tech/ai/openai-anthropic-profitability-e...
- dns_snek 3mo agoNuclear energy is really cheap too... as long as you ignore CapEx, would you like to invest?
- HDThoreaun 3mo agoMarginal cost of nuclear is huge. Marginal cost of inference is much smaller. Capex in nuclear isn’t a fixed cost, it is the marginal cost.
- 3mo ago
- brainwad 3mo agoAnthropic just announced it's on track to have its first profitable quarter: https://www.wsj.com/tech/ai/mind-blowing-growth-is-about-to-propel-anthropic-into-its-first-profitable-quarter-7edbf2f4 https://www.wsj.com/tech/ai/mind-blowing-growth-is-about-to-...
- dns_snek 3mo agoResponse: https://www.wheresyoured.at/anthropics-profitability-swindle/ https://www.wheresyoured.at/anthropics-profitability-swindle...
- gizmo686 3mo ago1 player is enough to create tension on price when "don't buy it at all" is a comptetative option. By most accounts, Anthropic and OpenAI both lose to "just don't buy" when they try charging at cost.
- bluGill 3mo agoNobody has seen the financials who is talking. We have various rumors of costs but no real reason to believe any of them.
- lenkite 3mo agoChinese models are dropping in price thanks to ridiculous levels of state subsidy where companies are forced into aggressive price wars to survive and grab market share. I am guessing this will also blow up sometime next year or in 2029 at the maximum. Btw, some Chinese corporates have already seen this and increased their price. Zhipu AI & Tencent for example. Alibaba, Baidu, and Tencent also announced multiple price increases for their AI services.
- LPisGood 3mo agoThis is in contrast to American models which receive _ridiculous_ levels of private subsidy.
- wqaatwt 3mo agoChinese companies like Deepseek are operating on shoestring budgets (allegedly less than 300 employees at Chinese wages). It’s not that self evident there is anything that needs subsidized besides compute (due to limited manufacturing capacity and access to Western chips in China)
- SwellJoe 3mo agoChina has the benefit of vast solar power and rapidly increasing battery capacity. Yes, that's subsidized, but it pays for itself in the long run. And, even with the price increases, Z.ai and Tencent are still much cheaper than Anthropic or OpenAI models. I think there's an efficiency focus among the Chinese models that is absent at OpenAI and Anthropic, and in the end I suspect efficiency will be the winning feature. Google seems to understand that. Gemini 3.5 Flash is pretty competitive with the big guys, and it's small enough for Google to run it profitably (I assume) for a price that's much less than the frontier models. Gemma 4 models are showing off a bunch of efficiency techniques (MTP, QAT, the 12B encoder-less vision model that soundly outperforms much larger vision models, DiffusionGemma), and I assume they have several more techniques that aren't published.