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The people who are most afraid of Chinese models are the VCs who poured into Anthropic and OpenAI at astronomically high valuations. Anthropic is valued at $1.2
by tristanj 3mo ago
The people who are most afraid of Chinese models are the VCs who poured into Anthropic and OpenAI at astronomically high valuations. Anthropic is valued at $1.2T and OpenAI is targeting $850B. These astronomical valuations were built on the premise that these labs would generate massive profits from premium API pricing, but the Chinese labs are completely undercutting this strategy by releasing excellent open models for free. If the frontier labs are forced to cut prices and join the race to the bottom in token prices, these valuations are unjustified, and VCs will face enormous (paper) losses.
- airstrike 3mo agothey will likely suffer enormous real losses too, not just paper, though not as enormous for VCs, breaking even is losing
- solumunus 3mo agoThe valuations are unjustified even at the prices they’re charging now. They’re going to try their best to offload these investments into our pensions before the inevitable crash.
- janalsncm 3mo agoRight, but retail investors weren’t supposed to find that out until after the IPO.
- techpression 3mo agoApparently it’s already happening to a degree, wether it continues or not (or even is relevant) is not really my area of expertise. https://finance.yahoo.com/markets/stocks/articles/goldman-says-hedge-funds-sell-131619522.html https://finance.yahoo.com/markets/stocks/articles/goldman-sa...
- lostmsu 3mo agoI had plenty of gains by holding investments which Goldman Suchs were making doom statements about.
- rootsudo 3mo agoAlways buy opposite, buy low and sell high. Too many people here buy high and sell low. When Goldman makes statement, half the time it is prepped by an associate or two that has minimal experience and goes through a MD that enjoys the gloom and doom. That’s why they publish. Goldman makes money on both sides of a trade.
- mediaman 3mo agoThe (quite excellent) article discusses several of your points. If you haven't read it, I recommend it. - Commodity market profitability is determined by marginal cost of production. LLMs have marginal cost; traditional software does not. - Models are not free. Downloading them is free. Running them is not. This has manufacturing economics, not software economics; the idea that they are "free" is an economic category error as it relates to their actual use - The highest tier Chinese models are not more economical than US frontier models. Try GLM 5.2 and see how much it costs to do real work. I did, and it was more expensive than GPT 5.6. - This is because US labs are leading on cost efficacy of inference ($/task) - Training will decline as a percentage of costs as inference expands compute share due to agentic workloads. A big part of training now is optimizing token efficiency. It's hard to distill token efficiency; that is perhaps why Chinese LLMs are so inefficient. - With increasing inference as % of total compute, if labs create efficient models -- which they can, because they can create highly optimized models amortized over very high inference loads -- they can be low cost producers, and be competitive at $/task rates OpenAI really shows the way here. Their cost per task is less than half that of Anthropic because of more efficient tokenization and less verbosity. OpenAI is both cheaper and better than Chinese models for frontier work.
- lemax 3mo agoBut this assumes Chinese models will not achieve token cost optimization. Intelligence needs are fairly flat for many tasks, and the Chinese models have caught up on this front. Next they achieve greater token cost efficiency and we don’t need OpenAI.
- VulgarExigency 3mo agoThe model that is most optimized around token cost is, in fact, Chinese. DeepSeek is astoundingly cheap by default, but if you use it from Reasonix (the harness optimized around its cache), it becomes even cheaper.
- ryeguy 3mo agoI keep seeing mention of the cache, what's special about it? All frontier llms have prefix caching, what is special about deepseek's approach?
- lorecore 3mo agoGood. Over the past few years, VCs have proven that they’re warmongering psychopaths. Hopefully China puts every last one of the Palantir/Flock/Anduril class out of business.
- happypappy123 3mo ago[flagged]
- lorecore 3mo agoI’m 100% certain that China won’t be sending any goons to my front door.
- yonaguska 3mo agoThis is true, but there is another foreign country that can send people to your door. What's to stop China from eventually buying that type of influence over our govt officials?
- Revanche1367 3mo agoIf our govt officials are willing to betray their citizens for money to China, what’s the point of preferring to give them power over us instead of giving it to China?
- platevoltage 3mo agoGiven the nations that have actually bought influence over our government officials, China would be an upgrade. I doubt the president needs another decked out 747 though.
- lmz 3mo agoNot that I'm anti-China, but their companies would have no qualms selling surveillance tech to your local gov too if they could. I'm sure Palantir, Flock, and other US companies would sell to China too if they could.
- cyanydeez 3mo agommm, the chinese models are also working on local GPUs at consumer grades. so theyre not just drainig cloud moats.
- vrm 3mo agogood luck running a 2.4T model on any local hardware. it’s not gonna happen. the arrow is to specialized hardware at least for the smartest models
- matheusmoreira 3mo agoI have hope it'll happen one day, even if not now.
- nekusar 3mo agoAlready is possible. On a machine with 32GB ram, and NO gpu. Just need a large SSD or NVME. Streams from disk to memory. https://github.com/JustVugg/colibri https://github.com/JustVugg/colibri
- khuey 3mo agoPainfully slow tok/s though.
- NekkoDroid 3mo agoIsn't it more s/tok?
- nekusar 3mo agoI didn't say it was fast! But its also a 800B sized model running on a ram constrained system with no GPU. Techniques, GPUs, more ram, and faster disks can always speed it up. But the point being is they run on low end machines now. Its now an optimization problem, not a possibility assessment.
- 3mo ago
- onesociety2022 3mo agoBut there a ton of other VCs who poured money into SaaS businesses. They have the opposite incentive. They want tokens to be cheap like a commodity so the value accrues in the SaaS/app layer.
- hamandcheese 3mo agoCheap tokens only benefits SaaS that depends on AI. Otherwise, cheap tokens means it is only more cost effective than it already is to cut out the SaaS and build instead of buy.
- Ericson2314 3mo agoYeah maybe *both" sass and training companies are wiped, imagine that!
- wordpad 3mo agoI think everyone understands models will be a commodity. Its the user base (with ads and upselling) and proprietary wrappers which will make money for typical customer. Even enterprise customers arent going to be spending a lot on tokens. Once labs no longer have to subsidize trainings tokens costs will drop 10x and once models get burned on chips costs will drop 10x more and you physically won't be able to burn significant number of tokens unless you're deliberately trying to.
- skeptic_ai 3mo ago[dead]
- rvz 3mo ago> The people who are most afraid of Chinese models are the VCs who poured into Anthropic and OpenAI at astronomically high valuations. Correct. These chinese labs has proven that having just the model is not a moat, and the safety concerns were all just attempts at regulatory capture. This is why labs like OpenAI and Anthropic are panicking and are racing to the exit before their valuations start being questioned.
- eeiei 3mo ago[dead]
- fnord77 3mo agoI guess I shouldn't try to buy shares of OpenAI on the private market...
- ProAm 3mo agotbh they are floundering even to regular investors. They are trying to give the US gov 5% of the company so they become 'too big to fail' but they are in trouble.
- ineedaj0b 3mo agoNot sure most of money is from VCs.
- hnfong 3mo agoWell, then let's hope you're wrong and the AI bubble won't also blow up private equity and wipe out people's retirement funds...
- isodev 3mo agoImagine how cool it would be if actual competition prevents Anthropic or OpenAI from becoming an Apple/Google kind of cartel. I don’t care if it comes from China or not.
- AlexCoventry 3mo ago[flagged]
- killingtime74 3mo agoGood old FUD
- __MatrixMan__ 3mo agoAre you saying that the US companies are above that kind of behavior?
- w4yai 3mo agoHe's saying Muricah good, communism bad. We got a time traveller guys!
- AlexCoventry 3mo agoAt least they can resist it, as we saw with Anthropic.
- JSR_FDED 3mo agoOh give me a break. Using a Chinese LLM will not put a Marxist under your bed. Did you know Gemini is shockingly bad at French poetry? Hasn’t stopped me for using it for all other tasks though.
- bornfreddy 3mo ago> Using a Chinese LLM will not put a Marxist under your bed. Interesting tangent - it might be taught to introduce stealthy backdoors in your company though. Maybe even across multiple PRs where each session puts a small chink in the armor, and together they allow unlimited access to the attacker who knows about them. After all, LLMs are mostly black boxes. How comfortable would you be running a Chinese compiler?
- phendrenad2 3mo agoVCs are just pass-through investors, the money comes from billionaires. And when billionaires face losing money, the whole system re-arranges itself to stop that from happening.
- sciencejerk 3mo agoYep! Maybe Chinese models are banned in USA and made completely illegal
- testbjjl 3mo agoWe both know the answer. Write offs. If your fund was not in AI heavy you’d have no investors.
- alex1138 3mo agoI'm a civilian, not a VC. In my own case, I'm worried how many things pass through the CCP. How censorship of mentions of Tiananmen Square is something they're quite interested in
- riskd 3mo agoHow exhausting.
- alex1138 3mo agoWhy? Why is this not a concern?
- JSR_FDED 3mo agoBecause you’re not that important. I don’t mean that in a mean way, just that if you’re a serious player in national security or something like that, you’re already not using Gmail, let alone ChatGPT.
- sciencejerk 3mo agoYou would be surprised...
- platevoltage 3mo agoClaude refuses to call Trump a Fascist.
- alex1138 3mo ago[flagged]
- platevoltage 3mo agoSo you only have an issue with Chinese Ai not calling a spade a spade?
- reinitctxoffset 3mo ago[dead]
- walrus01 3mo agoI would say it's not just the VCs but the various other entities that will be left holding the bag of debt if the AI-fueled datacenter construction boom/bubble pops. For a list of large and well known projects and their scales: https://epoch.ai/data/ai-data-centers https://epoch.ai/data/ai-data-centers
- hugopuybareau 3mo agoAren’t we the ones giving money to the VCs in the end of the rain cycle ?
- jillesvangurp 3mo agoI don't think it's that black and white. OpenAI and Anthropic are building valuable tools on top of their models. You get a very rough and much less polished version of that with open source tools and and open source models. And you still need inference infrastructure to run those. But at this point most of the competition is in the tool ecosystem, not the models. And while there are plenty of people toying with things like opencode there's a clear pecking order emerging where Codex and Claude Code/Cowork are generally considered the top choices before tools like MS Copilot, Gemini, and then a rapidly shrinking long tail of alternatives to those. In the end what companies pay for is not tokens but results. A DIY kit of models, mac minis or whatever, and a bunch of poorly integrated OSS tools doesn't solve their problem. For the same reason, people use Office 365 rather than running Libreoffice. And for the same reason things like AWS dominate the market rather than people DIYing their infrastructure together themselves. Most of the money is in polished turn key solutions. Which is what Anthropic and OpenAI offer. The juicy market here is the enterprise market. That's mostly business users, not programmers. They'll be hooking up all their SAAS tools (which they also over pay for), and other stuff. They'll be paying for boring things like data residency, compliance, etc. And they need access to reliable infrastructure to run all this stuff. They'll want this shit to just work and not to be dealing with a lot of poorly integrated stuff. Most of the billions invested are being sunk into infrastructure, chip design, and access to resources (land, water, energy) needed to run data centers. A handful of companies now own most of that infrastructure and they also happen to have the top models, researchers, the best tools, and warm customer relations. And they sell access via very convenient subscriptions with high enough limits that people don't have to worry about things like token cost. The game here is recurring revenue from customers that like predictable pricing, reliable quality of service, and iron clad compliance and data security & residency, and quality guarantees. These companies don't want to be chasing model quality and have to upgrade their entire company every few weeks. They want continuity and predictability. Mostly they just pay Anthropic, OpenAI, MS, or Google to take care of this for them. There might be some niche EU players that become a bit bigger. But I don't see a large scale switching to Chinese suppliers for a full polished alternative. The Chinese might give away their models. But I don't think they'll be generating a lot of revenue. And if you want to run your own models, you'll still need infrastructure to run it. These four companies together with the usual cloud giants control most of that and as well of the supply of resources (chips, data centers, energy, etc.) in the EU and US markets. There's going to be a long tail of self hosted and gobbled together stuff but it's going to be a much rougher experience for end users and it won't likely be most of the market any time soon.
- 21asdffdsa12 3mo agoI for once welcome the donations to the public of our generous basilisk worshiping overlords