Comment by mattalex
18 hours ago
You assume that openai's inference is profitable and that they aren't just trying to bolster revenue before their IPO.
The only indication that openai is profitable comes from openai (whom I wouldn't trust with any statement, especially when it comes to profitability).
In fact there is evidence that inference is not profitable simply because the rate of losses doesn't seem to reduce as revenue increases: if inference had great margins, we would expect that as revenues increase, the amount of spend on training reduces as a fraction of total expenses. Since the loss-making fixed costs shrink as a fraction compared to the profitable inference, we should expect profitability to rise with total revenue.
However, all leaks of openai's numbers seem to suggest the opposite: as revenues increase so do the losses.
The indication that OpenAI's inference is profitable is that 3rd party providers host large models for cheaper.
Given that OpenAI is ahead in intelligence, it's also reasonably likely that they are at the frontier of efficiency too.
Your "evidence" for OpenAI's inference not being profitable is apparently based on leaked financials supposedly showing growing losses for reasons entirely unknown.
With their research, training, data centers, chip development, and hardware product development, there seem to be a number of reasons that might explain growing losses.
> Given that OpenAI is ahead in intelligence, it's also reasonably likely that they are at the frontier of efficiency too.
Frontier labs have no incentive to be at the frontier of efficiency.
Claude still leads the pack in general intelligence yet has the worst efficiency by far.
They have an incentive to make their models efficient enough to serve demand and make a profit on it.
The incentive that is missing is passing on efficiency improvements as price savings to customers, when your model is still in demand because of its higher intelligence.
I don’t pay OpenAI’s bills - I pay what they charge me. Their cost accounting isn’t relevant to a user.
Argument was that open ai cannot be profitable with this. But sure, use it while you can.
You can make the other argument that China subsidizes the price and that they can't be profitable at this pricing level. From an industrial strategy standpoint, they already do this for many other industries with huge subsidized state loans.
So we can go round and round on this, each with our made-up objections about how it's temporary or unrealistic or impossible or whatever, or we can just accept the prices as listed and use that to guide our economic decisions.
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