Comment by reissbaker

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.