Comment by ACCount37

You don't even need insider info - it lines up with external estimates.

We have estimates that range from 30% to 70% gross margin on API LLM inference prices at major labs, 50% middle road. 10% to 80% gross margin on user-facing subscription services, error bars inflated massively. We also have many reports that inference compute has come to outmatch training run compute for frontier models by a factor of x10 or more over the lifetime of a model.

The only source of uncertainty is: how much inference do the free tier users consume? Which is something that the AI companies themselves control: they are in charge of which models they make available to the free users, and what the exact usage caps for free users are.

Adding that up? Frontier models are profitable.

This goes against the popular opinion, which is where the disbelief is coming from.

Note that I'm talking LLMs rather than things like image or video generation models, which may have vastly different economics.