{"id":49606195,"user":"loehnsberg","time":1788848495,"time_ago":"9 hours ago","type":"comment","content":"

Maybe true for frontier LLM, but there's plenty of space in the niches. For example, I think their TTS/STT models are pretty good, speaking from personal experience.","comments":[{"id":49606323,"user":"aurareturn","time":1788849446,"time_ago":"9 hours ago","type":"comment","content":"

Is there money in niche models?","comments":[{"id":49606353,"user":"catdog","time":1788849688,"time_ago":"9 hours ago","type":"comment","content":"

Is there money in frontier?","comments":[{"id":49606418,"user":"vineyardmike","time":1788850097,"time_ago":"8 hours ago","type":"comment","content":"

Yes...?

Is that not self evident by the insane revenue from frontier labs?","comments":[{"id":49606773,"user":"mastermage","time":1788852596,"time_ago":"8 hours ago","type":"comment","content":"

Revenue is not profit.

https://isaiprofitable.com/","comments":[{"id":49606961,"user":"aurareturn","time":1788853880,"time_ago":"7 hours ago","type":"comment","content":"

AI is profitable. Gross margins are high.

The only reason OpenAI and Anthropic are making a loss is due to training new models to keep up with competition - not because the industry is flawed in terms of business model.","comments":[{"id":49607766,"user":"debugnik","time":1788859115,"time_ago":"6 hours ago","type":"comment","content":"

Keeping up with competition is part of trying to stay in the frontier. If they stop training the profit disappears in a few months.","comments":[{"id":49607885,"user":"aurareturn","time":1788859882,"time_ago":"6 hours ago","type":"comment","content":"

The point is that the model is already immensely profitable. There is no fundamental reason why AI isn't profitable. It already is.

Insane competition does not last forever. When chip manufacturing first started, there were dozens of companies that had fabs that made compute chips. Nowadays, only TSMC is viable. Samsung and Intel survived because of geopolitics.","comments":[{"id":49610417,"user":"disgruntledphd2","time":1788875775,"time_ago":"an hour ago","type":"comment","content":"

> The point is that the model is already immensely profitable. There is no fundamental reason why AI isn't profitable. It already is.

We'll see I suppose. Until the audited financial statements are released, no-one who doesn't work for an AI lab can be sure.","comments":[],"comments_count":0,"level":7,"url":"item?id=49610417"}],"comments_count":1,"level":6,"url":"item?id=49607885"}],"comments_count":2,"level":5,"url":"item?id=49607766"}],"comments_count":3,"level":4,"url":"item?id=49606961"},{"id":49606878,"user":"slopinthebag","time":1788853280,"time_ago":"8 hours ago","type":"comment","content":"

Lol that chart is hilarious when you look at Nvidia.

Always sell shovels in a gold rush I guess","comments":[],"comments_count":0,"level":4,"url":"item?id=49606878"}],"comments_count":5,"level":3,"url":"item?id=49606773"},{"id":49608890,"user":"phtrivier","time":1788867431,"time_ago":"4 hours ago","type":"comment","content":"

Sure, there is revenue, and market valuation. Is there _profits_ in frontier models ?

What is the horizon for openai and anthropic to _make_ money ? Will they achieve that by charging more for frontier models, or investing slightly less in training frontier models, etc... ?","comments":[],"comments_count":0,"level":3,"url":"item?id=49608890"},{"id":49606820,"user":"pbmonster","time":1788852880,"time_ago":"8 hours ago","type":"comment","content":"

> Is that not self evident by the insane revenue from frontier labs?

No...? Of course not?

Because revenue is only one side of the equation. Did you ever look at total cumulative OPEX and CAPEX, and how long it will take them to even just break even at current growth?","comments":[{"id":49606903,"user":"aurareturn","time":1788853440,"time_ago":"8 hours ago","type":"comment","content":"

Anthropic is growing 10x revenue every year.

They're likely over $80b ARR by now. They'll be at $800b ARR next year at the same rate. Let's say their growth gets cut down to 3x instead of 10x - that's still $240b ARR by this time next year.

When you are growing so fast, you don't need to make a net profit. You just need to make sure your unit economics are good - which it seems like they are given reports that their gross margins are at 60-70%.","comments":[{"id":49607111,"user":"surgical_fire","time":1788854788,"time_ago":"7 hours ago","type":"comment","content":"

> They're likely over $80b ARR by now. They'll be at $800b ARR next year at the same rate.

And they will be 800 trilion ARR in a couple of years, following that same rate! 8 quadrillion by 2029!

> When you are growing so fast, you don't need to make a net profit. You just need to make sure your unit economics are good - which it seems like they are given reports that their gross margins are at 60-70%.

If their margins were anywhere near this good, they wouldn't need to raise so much money so often.

If you create a machine that turns 1 dollar into 3 dollars, you don't dillute your ownership of the machine, you use your fabulous profits to expand your machine's capabilities.","comments":[{"id":49607902,"user":"aurareturn","time":1788859978,"time_ago":"6 hours ago","type":"comment","content":"

  If their margins were anywhere near this good, they wouldn't need to raise so much money so often.\n

\nWhy not? They are reinvesting into growth. There isn't a clear winner yet and Anthropic wants to make sure it is one of them. Taking a profit now while letting OpenAI take your marketshare and train better models is not very smart.","comments":[{"id":49608099,"user":"surgical_fire","time":1788861494,"time_ago":"5 hours ago","type":"comment","content":"

Or they bleed money like crazy, and their margins are pretty awful. Which is the correct answer.

Your $200 subscription is a major net loss for them. The vast majority that pays for that would cancel in a heartbeat the moment they had to pay API prices. Which may or may not be profitable, I am not entirely sure. But for the sake of argument, let's assume that it is.","comments":[{"id":49611111,"user":"vanuatu","time":1788878894,"time_ago":"29 minutes ago","type":"comment","content":"

Why are we using consumer prices when the vast majority of their revenue is from enterprise api usage?","comments":[{"id":49611440,"user":"surgical_fire","time":1788880018,"time_ago":"10 minutes ago","type":"comment","content":"

Wihout insight on how much enterprise is paying, it is impossible to draw any conclusions. Unless you have any access to their contracts and are willing to share evidence? I find that highly unlikely.

People here throw around crazy numbers - the dude above was claiming they have some insane good margins, numberd that he took out of his ass.

The only evidence I have is that they are incredibly unprofitable, and they keep raising insane amounts of capital like crazy.

There was a leak sometime ago that they were EBITDA positive during a quarter where they didn't pay for part of their compute. And EBITDA is a cute metric to use when depreciation is actually very important to them, as a model from a year or so ago is nearly worthless.","comments":[],"comments_count":0,"level":9,"url":"item?id=49611440"}],"comments_count":1,"level":8,"url":"item?id=49611111"},{"id":49610437,"user":"aurareturn","time":1788875884,"time_ago":"an hour ago","type":"comment","content":"

Are we still calculated $200 subscription token spend based on their highly inflated API token cost and then concluding that they must be losing money on all $200 subscriptions?","comments":[{"id":49611347,"user":"surgical_fire","time":1788879693,"time_ago":"16 minutes ago","type":"comment","content":"

Are their API token costs highly inflated? I see no evidence of that.","comments":[],"comments_count":0,"level":9,"url":"item?id=49611347"}],"comments_count":1,"level":8,"url":"item?id=49610437"}],"comments_count":4,"level":7,"url":"item?id=49608099"}],"comments_count":5,"level":6,"url":"item?id=49607902"}],"comments_count":6,"level":5,"url":"item?id=49607111"}],"comments_count":7,"level":4,"url":"item?id=49606903"}],"comments_count":8,"level":3,"url":"item?id=49606820"}],"comments_count":16,"level":2,"url":"item?id=49606418"}],"comments_count":17,"level":1,"url":"item?id=49606353"}],"comments_count":18,"level":0,"url":"item?id=49606323"}],"comments_count":19,"url":"item?id=49606195"}

Comment by loehnsberg