Comment by lenkite
12 hours ago
> They do need to start making money, but I don't think anyone has a plan as to how they are going to do this.
Doesn't this just mean price increase ? What is not clear is how much the price needs to increase for AI companies to break even some time. 3x increase ? 10x increase ? Even more ? No one seems willing to give a clear number.
You can only increase the price so much. With every price increase you're going to lose customers, which could lead to further price increases.
I'm not entirely convince that the AI companies can raise prices and keep enough of their customer base to make their current strategy commercially viable.
They could also lower their production cost, but that runs counter to building/buying new datacenter capacity. Realistically I think they need to look for applications where cheaper models are just as good and niches that where the ROI on AI is more clear.
Realistically they can't go that much above the actual cost for inference since the customer can always switch to self hosted or inference only providers. Or their models have to be significantly better than the open source models for the foreseeable future. They will never be able to charge much more for their lower tier models.
They already do it. Antropic hiked prices several times, Google just hiked prices in April/May by a lot (by lowering limits in plans a lot). It will continue regularly. I remember when 200$/m plan was first unveiled there were screams about insanity of it all. Today, if anyone complains about own LLM experience, the first question from the comments would be "are you "at least" paying 200$/m plan, for the poors?" like that is the baseline now and 1000$/m is a serious consideration. And looking at Google, they are slowly shifting whole features upwards in tiers. As does Antropic.
> Doesn't this just mean price increase ?
Have you heard about Deepseek? In a world were it (and other Chinese open models) didn't exist, OpenAI and Anthropic would be profitable already
> In a world were it (and other Chinese open models) didn't exist, OpenAI and Anthropic would be profitable already
How so? The existence of e.g. DeepSeek doesn't lower the cost for OpenAI. OpenAI have almost a billion users, or so they claim. Adding even another billion users isn't going to help them, unless they can keep cost under control.