Comment by HDThoreaun
1 day ago
Thank you. So with these numbers it seems like half a billion subscriptions at $500/yr is on the table. Obviously theres going to be competition in this market and self hosting cheap models may become the dominant use case. Assuming the labs are able to get most of the market though, the market size is something like a quarter trillion a year within the next decade. It's hard for me to imagine the whole sector failing if that happens.
I do think free accounts are going to end pretty soon, and some of the workers in your tier 3 will pay, but even without them this seems like a pretty healthy market size. I also wouldnt be surprised if mid tier workers are able to afford the $1000/yr vs $500. I use yearly rates because I find it easier to compare them to GDP/salary numbers
I mean, sure. Assume all you want but to guess that the entirety of High-tier plus almost all of the Mid-Tier will spend, on average $500 per annum is bonkers.
I believe we've started to see the top of what individuals and businesses are willing to pay for the current model capabilities. We are nowhere near AGI and models are really only providing significant value in niche markets currently (programming and cybersecurity). And just like SaaS the enterprise has the option to buy hardware and leverage their own models at will which can potentially offset costs and TAM as well. I have talked to a number of large financial corporations in the last 6 months and most have internal initiatives. The same applies in the healthcare vertical.
$250B per annum with AI? That's 20% of global software spend now. Sure, that's possible but that assumes current market prices hold. What if inference ends up normalizing between DeepSeek/Xiaomi & Anthropic/OAI? There's 50% of your revenue and with current costs for inference and training in the US at astronomical levels the US AI industry could also very well be setup to implode overnight.
Lastly I don't believe free can go away anytime soon because it can't. As soon as Anthropic and OAI remove that option those users will move to whatever is. For most of those users it's not a luxury to choose, it is the only option.
The financial engineering occuring right now is something I don't doubt will be text book lessons of the future. We've seen it before and I believe Peter Sorkin when he says that we will see a crash of this bubble, it's just a matter of how catastrophic it ends up being.