4 ms·
Is there money in niche models?
by aurareturn 1mo ago
Is there money in niche models?
- catdog 1mo agoIs there money in frontier?
- vineyardmike 1mo agoYes...? Is that not self evident by the insane revenue from frontier labs?
- mastermage 1mo agoRevenue is not profit. https://isaiprofitable.com/ https://isaiprofitable.com/
- slopinthebag 1mo agoLol that chart is hilarious when you look at Nvidia. Always sell shovels in a gold rush I guess
- mastermage 1mo agoI mean yeah
- aurareturn 1mo agoAI is profitable. Gross margins are high. The only reason OpenAI and Anthropic are making a loss is due to training new models to keep up with competition - not because the industry is flawed in terms of business model.
- debugnik 1mo agoKeeping up with competition is part of trying to stay in the frontier. If they stop training the profit disappears in a few months.
- aurareturn 1mo agoThe point is that the model is already immensely profitable. There is no fundamental reason why AI isn't profitable. It already is. Insane competition does not last forever. When chip manufacturing first started, there were dozens of companies that had fabs that made compute chips. Nowadays, only TSMC is viable. Samsung and Intel survived because of geopolitics.
- disgruntledphd2 1mo ago> The point is that the model is already immensely profitable. There is no fundamental reason why AI isn't profitable. It already is. We'll see I suppose. Until the audited financial statements are released, no-one who doesn't work for an AI lab can be sure.
- deleted 1mo ago[deleted]
- mastermage 1mo ago> The only reason OpenAI and Anthropic are making a loss is due to training new models to keep up with competition - not because the industry is flawed in terms of business model. So in other words they are not profitable? Like you cant say they are profitable and then in the next sentence say they make a loss. That is not how profit works.
- pbmonster 1mo ago> Is that not self evident by the insane revenue from frontier labs? No...? Of course not? Because revenue is only one side of the equation. Did you ever look at total cumulative OPEX and CAPEX, and how long it will take them to even just break even at current growth?
- aurareturn 1mo agoAnthropic is growing 10x revenue every year. They're likely over $80b ARR by now. They'll be at $800b ARR next year at the same rate. Let's say their growth gets cut down to 3x instead of 10x - that's still $240b ARR by this time next year. When you are growing so fast, you don't need to make a net profit. You just need to make sure your unit economics are good - which it seems like they are given reports that their gross margins are at 60-70%.
- surgical_fire 1mo ago> They're likely over $80b ARR by now. They'll be at $800b ARR next year at the same rate. And they will be 800 trilion ARR in a couple of years, following that same rate! 8 quadrillion by 2029! > When you are growing so fast, you don't need to make a net profit. You just need to make sure your unit economics are good - which it seems like they are given reports that their gross margins are at 60-70%. If their margins were anywhere near this good, they wouldn't need to raise so much money so often. If you create a machine that turns 1 dollar into 3 dollars, you don't dillute your ownership of the machine, you use your fabulous profits to expand your machine's capabilities.
- aurareturn 1mo agoIf their margins were anywhere near this good, they wouldn't need to raise so much money so often. Why not? They are reinvesting into growth. There isn't a clear winner yet and Anthropic wants to make sure it is one of them. Taking a profit now while letting OpenAI take your marketshare and train better models is not very smart.
- 1mo ago
- phtrivier 1mo agoSure, there is revenue, and market valuation. Is there _profits_ in frontier models ? What is the horizon for openai and anthropic to _make_ money ? Will they achieve that by charging more for frontier models, or investing slightly less in training frontier models, etc... ?