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I think the nuance that's being missed here is that the profit margin of inference serving when there's perfect competition is close to 0. Zero profit means no

I think the nuance that's being missed here is that the profit margin of inference serving when there's perfect competition is close to 0. Zero profit means no recouping investment costs effectively bursting the bubble. Technological progress can come at extreme pace but the lack of profits can still torch both the startup frontier labs and the hyperscalers. We plebians can then pick up H100 gpus off Ebay to help us invent new superconductors and generate waifu videos in pur basement...

pu_pe 2mo ago
Profit margin determines whether OpenAI and Anthropic survive. The hyperscalers would be fine with a model where they make huge investments in infrastructure and you pay to access them per use/per hour. That is already their model for cloud compute and it is highly profitable, even though the vast majority of what people do with it (storage, VMs, etc.) is a commodity.
- bigbadfeline 2mo ago
  > The hyperscalers would be fine... their model for cloud compute... is highly profitable. "fine" and "highly profitable" are doing a whole lot of heavy lifting here, actually masking the quantitative reality that these "high profits" are nowhere near the height required to pay back their debts and remain profitable enough to prevent a sharp drop of their stock prices - that kind of development is the opposite of "fine" as far as investors, ordinary people and the wider economy are conserned. > Profit margin determines whether OpenAI and Anthropic survive. The hyperscalers would be fine. That's not how the market works, if OAI or Anthro default, they'll bring down the whole market, it'll be 2008 on steroids. Assuming the fire can be contained to only two trees misses the reality of how dense the forest is and how hot and strong are the winds blowing towards it.
  - pu_pe 2mo ago
    I meant that the current business model of the hyperscalers is highly profitable, and that model is selling compute that you could build yourself but you'd rather not to. If OpenAI or Anthropic default because people prefer open source models, they will still have compute for rent. The only scenario in which they are truly screwed is if demand for AI goes down.

pu_pe 2mo ago

Profit margin determines whether OpenAI and Anthropic survive. The hyperscalers would be fine with a model where they make huge investments in infrastructure and you pay to access them per use/per hour. That is already their model for cloud compute and it is highly profitable, even though the vast majority of what people do with it (storage, VMs, etc.) is a commodity.

bigbadfeline 2mo ago
> The hyperscalers would be fine... their model for cloud compute... is highly profitable. "fine" and "highly profitable" are doing a whole lot of heavy lifting here, actually masking the quantitative reality that these "high profits" are nowhere near the height required to pay back their debts and remain profitable enough to prevent a sharp drop of their stock prices - that kind of development is the opposite of "fine" as far as investors, ordinary people and the wider economy are conserned. > Profit margin determines whether OpenAI and Anthropic survive. The hyperscalers would be fine. That's not how the market works, if OAI or Anthro default, they'll bring down the whole market, it'll be 2008 on steroids. Assuming the fire can be contained to only two trees misses the reality of how dense the forest is and how hot and strong are the winds blowing towards it.
- pu_pe 2mo ago
  I meant that the current business model of the hyperscalers is highly profitable, and that model is selling compute that you could build yourself but you'd rather not to. If OpenAI or Anthropic default because people prefer open source models, they will still have compute for rent. The only scenario in which they are truly screwed is if demand for AI goes down.