Comment by codemog
6 hours ago
Can someone breakdown to me how this makes any sort of economical sense? Spending billions and billions to have the 3rd best model while even the number 1 and 2 players already seem to struggle making a profit. What am I missing here? Not trying to go full Ed Zitron but this doesn’t make sense to me.
Previously they were a distant fourth. They're not going to single-shot catch up to OpenAI or Anthropic, but they moved up the ladder one rung.
In the short term labs are not profitable, although supposedly Anthropic is close. But Amazon was also famously unprofitable for many many years, and then won huge. Current profits or lack thereof are not necessarily important to investors: what's important is they believe in your future potential profits.
In this case, Elon clearly believes much of the economy will be run by AI in the future, and the economic value of a token will rise faster than the cost of generating the token — including the amortized cost of training the model to produce that token. Thus he is building a lab to train models and charge for inference of those models, and — he believes — it will eventually become profitable even if it isn't now.
You may or may not agree with him (and you may or may not agree he's capable of beating Ant/OAI), but current profits aren't a great indicator of whether he believes future profits are attainable. Tesla and SpaceX were also very unprofitable, until they weren't.
Personally I agree with him that there will be massive profits in the future, although I am not as confident in his ability to beat Ant/OAI, at least given his recent difficulties in retaining researchers.
They're going to fall behind Google soon.
Amazon was 'unit profitable' very early.
Yes - it's not unreasonable for Elon to bet long horizon ... there are after all many car companies, why not AI?
He's already winning gov. contracts, that could continue.
It's an odd bet but not entirely wrong or dubious.
They have the same dreams as their competitors - finding a breakthrough that gives them an edge over the others and makes them dominant. And also, having the word 'AI' anywhere near your company makes all the right numbers go up, so having an in-house AI division that Musk can bundle with the other companies to pump their valuations with is very helpful to him, even if the product itself loses some money.
You could be typing the same about Google or a number of the other labs right now.
A diverse market full of choices keeps it from becoming the browser wars all over again.
Google is playing a different game. I don't really know what game they're playing, but they're not trying to beat Claude Code. They have coding capabilities and Antigravity, but I'd be surprised if it's much more than an afterthought. They're focusing on efficiency, models at the edge, human interaction, image and video, etc. in ways Anthropic, in particular, is not.
Google wants its AI to be pervasive in everyone's daily life. Merely being the best at coding is not how you get there.
I am more bullish on Google in AI than most folks, I think, as they have been focused on efficiency in a way most US vendors have not. They've published a ton of papers on ways to make LLMs more efficient and capable on smaller devices.. Google wants to own the on-device market for AI, and I don't see many credible competitors in that space.
If I had to summarise Google’s effort it would be: stay close but let the others burn themselves out. Position for the long game until you see something worth betting the company on.
Apple similar, without the “stay close” bit.
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> Google wants its AI to be pervasive in everyone's daily life.
Google wants nothing more than the world to remain stuck in 2000 - 2020 where search was king. Their organisational inertia will fight its AI progress every step of the way and this very well explains why they are not leading the AI pack despite inventing the technology.
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I don't know google's AI strategy but what I can tell from my usage and others around me is that google search usage has declined considerably.
Terms like "Google it" have been completely replace by "Ask AI".
I personally mostly use google to find businesses close to me and to search reddit and wikipedia.
Google seems to become a dead business very soon. Search traffic is being split between AI and social networks and google is bad on both fronts. Its AI proposition is more or less like the Google Plus. Nobody really wants it but they know about it because google pushes it everywhere it can.
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At the same time that they’re seemingly exiting android?
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Google at least is serving AI results on SRPs billions of times a day, and has pre-existing expertise in data center buildouts and custom silicon.
They have one of the more compelling cases for rolling their own.
X has grok built in to every post as does every Tesla Car
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Google is using AI at such scale internally they don't need external customers to recoup their investment.
> Google is using AI at such scale internally they don't need external customers to recoup their investment.
That's assuming their flagship product remains relevant in an AI-powered world.
Which brings to mind: most of the big shops product (chatgpt, claude, grok, etc...) ALL rely on search, and NONE of them actually have a running search stack.
Which means, they must all be calling Google, no?
How does Google make money from that?
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How is this any different than the browser wars? We use to have a diverse market full of choices, and now we have Chromium (almost all market share) and Firefox/Safari on the edges.
> A diverse market full of choices keeps it from becoming the browser wars all over again.
This is a great analogy but I worry you might be implying something I don't agree with but you didn't explicitly say what I'm worried about, so let me call it out:
Microsoft played a dirty game with I.E, but they are in the dirty game business. It wasn't only I.E, it was their OS, Office suite and everything else they do business in.
Google Chrome took advantage of that dirty game and now you have the Chromium engine that powers a lot of browserlike frameworks.
No one born in the LLM age even knows what I.E means or stands for, as it should be - a horribly designed, poorly working product foisted upon users via the Windows distribution system - a dishonorable product from an ethically corrupt company forever lost in history, right alongside Clippy and DCOM.
OTOH, I am glad that Microsoft played a dirty game with I.E and didn't just stop playing dirty there - they jacked up the price of Windows if an OEM even dared to bundle in Netscape Navigator instead - who knows, if they hadn't done that, there wouldn't have been a Google or Apple. We would all be using Windows and Windows Search and Windows Phone.
And without Google, we might not have had the modern LLM as we know it. We would have had some trashy Windows Autocomplete Copilot Clippy. Ugh!
"No one born in the LLM age even knows what I.E means or stands for, as it should be - a horribly designed, poorly working product"
As one of my first jobs involved getting a website to work with IE6 I surely hated it, but when it came out, it seemed to have pushed the web technologies in general.
The problem was not the browser technology, but microsoft abusing it's monopoly to don't give a shit about (open) web standards.
Why does Microsoft feel so gross
Google invented the transformer architecture. You really can't say the same about them.
Google Brain invented the transformer.
GDM ... not so much.
The product is the stock.
It is very valuable when you have various bundles of services, such as satellites, AI, and so on, to keep pace with the majors so that you keep pace with their valuation.
These stacking valuations are not additive, they're multiplicative because you additionally market investors to the synergy between them.
Having the third best model statistically is extremely useful in this context.
The weaknesses can be multiplicative as well. One division bleeding capex can drag down all the rest, no matter how well they might be doing. And the P/E ratio on all of them is riding unrealistic expectations, which can actually be fine for a long time but forces growth even in areas where it doesn't make sense. (Maybe that's where the "let's build data centers in a high radiation hard vacuum!" nonsense comes in; you just need a story of how the P/E ratio is possible to justify in the future? No need to argue over likelihood, just have a tale to tell?)
I know that SpaceX have tremendous potential, the problem is that we account future potential that maybe not happening in 20 - 50 years
> future potential
Starlink doesn't qualify? Because that's a practically unbelievable track record. It's easy to say it's obvious, but it was only obvious in hindsight (or perhaps to Elon, but I think the reason that it was successful was actually more about him just being relentless)
I'm not an Elon acolyte, but as with his other enterprises (SpaceX, Tesla), he succeeded where others (Irridium etc) repeatedly failed.
It's really hard to argue that he got lucky when he keeps pulling these really extremely high capex and hard-tech and business successes off so cleanly, especially when you see the entrenched opposition (govt, politics, competitors) that's been arrayed against him.
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This market is far from mature or established to be making rankings. There's been plenty of tech markets where the early days didn't predict the later years.
I'm personally skeptical of Grok but maybe they can pull off a profitable niche with Cursor integration once Claude loses it's edge.
My guess is that the use here is similar to the reason AWS started as Amazon selling their excess capacity.
Between Tesla, SpaceX, X, Boring Co and Neuralink they probably want the capability internally for a lot of different applications.
If the whole data centers in space thing works out AND people keep protesting/blocking data center build outs on land SpaceX will eventually dominate the entire AI industry just based on escaping scarcity.
That Amazon story is a misnomer. They just saw an opportunity with the tech and hardware they had to make a new offering for customers. It's not like they could just offer their spare capacity, then eg at peak US time snatch it back for the retail site
For many years, I watched my apps performance on AWS suffer in December around all the holiday sales. They might not snatch it back but they probably saturated it during high demand periods.
> Can someone breakdown to me how this makes any sort of economical sense?
Capital markets are excited by AI.
By tying his rockets to AI with his vision of “orbital data centers”, Elon turned an $8 per share IPO (at least according to financial times and morgan stanley) into a $135 per share (1.8T) IPO.
Well that's the only way to escape the permanent underclass, otherwise even Elon is not excempt;)
That is the whole purpose of research. You could have put the same argument for any breakthrough technology, like why spend billions on something new when you have XYZ already.
In my opinion they all are looking at AI as a software business where in reality it is more like a low margin hardware/commodity business.
Commoditize your opponents USP then eat up their engineering talent / silicon / real estate when they fail, perhaps?
I’ll be the first to admit it seems ambitious / implausible to try to (1) undercut the megalabs (2) move everyone’s focus back to tweets and then (3) profit.
A bit like handing out free horses to undercut Standard Oil so that you can go back to reaping the profits of your wheel tapping business.
With that frame of mind, nothing would be done. Why make another search service if Altavista and Lycos already do it?
Its less about the model; elon is trying to make SpaceXAI a hyper scaler that also happens to have a good model. Grok is just the cherry on top of a powerful AI cluster that can also rent compute to its competitors, like aws.
„Markets can remain irrational longer than you can remain solvent.”
Likely doesn’t make sense, at least not immediate/mid term. They don’t have to aim for number one though, just for enough cash flow and growth.
Grok is the #1 uncensored easily-available model, and it's also tightly integrated with Twitter.
Is uncensored a selling point? What do people use uncensored Grok for (like, real use cases) that they can't or won't use other LLMs for? Literally the only thing I can think of is generating bad porn of unconsenting people.
Some have mentioned legal work. OpenAI and Anhropic models would refuse to work on cases where something immoral happened.
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I don't really have a use for a model that thinks "how many people are in this photo?" is a political question.
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I mean absolutely read any thread about Fabel and it's fill with people complaining about how it instantly downgrades or refuses if anything has CVE in the name.
Other then that there is the whole alignment issue. Models that are 'nerfed' in just about any manner tend to exhibit reduced performance is seemingly unrelated areas.
That said Grok doesn't appear to be close enough to the frontier for that to matter. Maybe if they catch up it will.
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I don't remember online discourses on filter avoidance for Grok to be any different from typical ones, except that it allegedly have tendency to take porn-biased interpretations of prompts, I think the "uncensored" pitch they had for a while was pure marketing in the end.
A few months ago it was the only model that would make children in pictures naked. I think that's been patched since Elon got sued over it.
Uncensored?
Great if you want to make virtual child porn, I guess.
Frontier is one thing, but low-cost really good models are another. All the chatbots and day-to-day corporate bots are likely to use models that offer the best performance at the lowest cost. I think Grok has an angle here if they can build customer trust.
Quitting my job if I have to use any Musk product… I know Anthropic’s lease of xAI data centers pumped SpaceX stock, so they’re kinda in-bed with each other, but directly using Musk products is pure immorality IMO. Using a Nazi’s products is not an acceptable outcome to me, and I’m fully prepared to change my job/entire career over it. I’m still young, and have time to pivot.
Grok runs tools stupid fast, just about as fast as Antigravity, running Gemini 3.5 Flash.
Anthropic is already profitable, economics is no longer an issue as they have found PMF in enterprise software market. You might need to update your views.
https://www.wsj.com/tech/ai/mind-blowing-growth-is-about-to-...
Having a profitable quarter in which they were given an undisclosed discount on compute only in that quarter does not necessarily mean “Anthropic is Profitable.” It doesn’t mean they’re not, either. Even the breathless article about their first profitable quarter, (which, frankly, read more like a press release,) mentioned in passing that it’s “not clear” if it’s sustainable because their compute expenses are likely to increase. I get the feeling that if they were sustainably profitable, they’d shout it from the rooftops.
But we don’t know.
If someone proudly announces they and their partner could afford to eat at a particular fancy restaurant every night last week, but for that specific week the restaurant had a BOGO deal, and they also didn’t disclose how they determined that they could afford it, you don’t really know if they could sustainably afford to eat there every night, right?
Read the latest semianalysis article.
Anthropic is definitely profitable now, in fact, they’re crushing it.
They might be profitable for the exact two months SpaceX is giving them billions worth of free compute doesn’t seem convincing to me.
The only thing I can possibly think of is that they could use it internally at possibly a lower cost and offer it to people who have a Tesla cheaply. Owning Cursor might help for integration or data collection.
inference is profitable, these companies are in the red because they're paying a premium to get the compute now versus later (because compute is the only moat when open models are catching up)
we're literally looking at insane margins over compute, as energy gets cheaper, margins get wider - china focusing on cheap solar is probably going to be a key reason why their AI is so much cheaper
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Grok build already punched above its weight and is the nicest TUI, claude and codex are clearly vibecoded by web developers that don't understand systems (eating SSDs, spaghetti logic, extinguishing kernel watch limits, etc). I think Anthropic and OpenAI are both engaged in their own theatre, trying to define and redefine what game they are even playing, trying to shift to immeasurables like safety or security or exclusivity. There's definitely room at the top.
People are saying, "There are only a couple of frontier labs. This is a really hard problem and not many people can do it."
Elon's reaction to these kinds of statements is oddly predictable.
All they have to do to differentiate is differentiate the shape of worldview through RLAIF/RHLF and system prompts.
Milking shareholders at the next dilutions that numbers are growing but you need more money.
SpaceX offers free AI usage to users, along with using AI to power their products so it is effective for them to avoid overpriced API pricing. The models can be designed specifically for their own data centers.
It's simple. Elon's top priority now is "killing the woke mind virus" at any cost, and his Nazi AI is a key tool for that. As long as twitter users take Grok at face value, and spread its talking points all over, it's worth it to him. It doesn't matter if it doesn't make economical sense, it only matters that Elon Musk personally wants to keep it going.
I don't want to go into it, because I agree that Elon is a very disturbing person, and there's clear evidence that Grok's harness attempts to bias towards his views.
However, Grok also seems to come out consistently as the most balanced of the chat-based LLMs...
So I'm not sure how to reconcile that.. maybe that's in line with "free speech absolutism", and if so, that's something I can get behind.
How does it seem to be more balanced? I haven’t seen the numbers
> this doesn’t make sense to me
My hypothesis is that all the top providers realize that, lacking vendor lock in, all SOTA models in a year or so's time will be similar in capability. Also, open weights models are continuing to catch up in a year's time, sometimes less.
So they are trying to lure you in with differentiating, superior capabilities into their proprietary, non-open, non-standard agent harness.
It's the Hotel California playbook: These amazing capabilities are to attract you like moths to a flame and keep you warm and alive around the flame but waterboard and shock you if you attempt to move away from it. Like AWS Egress charges.
It’s Elon Musk. You try explaining it
Elon Musk doesn't do normal finance. Trying to understand it will melt your brain.
Elon Musk is the paperclip maximizer except that he doesn't need iron atoms, but dollars.
I get what you're saying, but I don't see the issue here. 95% of people don't need latest Claude Opus or Fable for their work. Most people are not software engineers. Having a model that excels at other things and is faster, cheaper, accessible directly via social media, and "good enough" is a viable pathway. AI aside, when was the last time your company provided you with the "best" tool? Microsoft has made being third best in the desktop OS and cloud provider markets a highly profitable art form. I think it's too early to pick winners in AI right now.
And as others said here, xAI is also probably throwing money into AI and hoping for a breakthrough. Except in this case it's a rocket company, social media company, cloud compute provider, and satellite ISP all rolled into one that can not only bankroll the development and perform all kinds of crazy accounting shell games but can potentially benefit from any breakthroughs in other lines of business. If those Google and anthropic compute contracts hold, a lot of investment is recouped.
Maybe I'm desensitized from the launching of the Tesla Roadster into space, "bulletproof" cyber truck, and the boring company flamethrower, but this doesn't seem too wild to me.
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I had to scroll down so far to see someone who speaks my language. Thank you. If Grok was the last model on the planet, I would not use it. For the very reason mentioned above. And no, none of the other tech CEOs are that comically evil that they’d take it upon themselves to cut aid from the world’s most vulnerable children while also being the world’s richest man. The optics of that alone… Never letting it go.
It sounds like they are building a honeypot for Russia, given Musk's open admiration for Putin.
No one sane would use this platform.
Surely grok has a built-in market with too-online, retired boomers. It's free real estate.
This comment says more about your misunderstanding of the world than anything about X
I thought it was pretty accurate tbh.
How so?
3rd best chat model? 5th or 6th maybe...
GPT
Qwen
Gemimi
MiniMax
Claude
Ollama
GLM
Kimi
DeepSeek
Ollama is just a local app wrapper/cloud service serving third party apis and models idk why it made it into this list tbh
They probably meant Llama.
Claude isn’t a model either.
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SpaceX needs to keep raising many billions every year. The rockets part isn't going to make money for a long time, so diversion tactics
https://news.ycombinator.com/item?id=48828648
Also Elon has a grudge with Sam Altman and wants to beat him
even more so after losing the lawsuit, imo