Comment by aurareturn
8 hours ago
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.
Keeping up with competition is part of trying to stay in the frontier. If they stop training the profit disappears in a few months.
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.
I'm sure each frontier model pays for itself, but I'm not sure if the position in which you spend all the profit into the next frontier model has an exit, since the moment you stop you're guaranteed to lose frontier status in a few months.
I can only see that working out if you're the last one standing and there's no competition left at that tier, is that the strat? Competition doesn't last forever but whoever stops at the current frontier will be the one to disappear.
> 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.