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Comment by nok22kon | Hacker News Reader

big AI labs make so much money because they have a good (amazing) product

Do they even _make_ actual money? https://isaiprofitable.com/ seems to disagree.

Do they dupe VC into enormous datacentre and capacity build-out investment? Why yes, actual money going to the AI hypester pick-axe vendors (and early equity dumpers) in that sense, absolutely yes it does.

Is Big AI on track to pay that back with profit from any foreseeable and defensible business model? Different question. I sincerely doubt it.

I think one of the more sober analysis that focused on danish firms exclusively predicted the overall growth impact on GDP to be a bit less than half a percent. Now, well that doesn’t sound very large, considering nominal GDP for the world is nearly $60 trillion, that is a big deal. I don’t know if that justifies trillion dollar evaluations for the providers, but even a small improvement over a large base is meaningful.

I bet Sam, Dario and others have a good salary and an even better stock plan

The good thing about open capital markets is the possibility to invest in the upside. The downside is who gets holding the bag when the money runs out

You were a net loss for ~18y or even more and not many people were concerned.

I think it is rather disgusting to equate raising humans and training an LLM

This seems wrong to me on multiple different levels.

One, this conversation is about economy side of things.

And two, calling comparison between humans and LLMs disgusting when LLMs are borderline GAIs sounds very xenophobic. Did you see the thread about LLM-written fiction contest the other day? https://news.ycombinator.com/item?id=48782890

A net loss on the order of dozens of thousands of dollars. And one whose primary purpose is not wealth creation.

Conservative estimates in the United States puts it at $300,000 to raise a child from 0-18, including the cost of birth in the healthcare system. It goes up to $1 million for a HCOL area though.

> And one whose primary purpose is not wealth creation.

I take it you know your primary purpose.

I was a net loss for quite longer than that. Nobody was concerned because I was surrounded by people who loved me.

Big AI labs aren't making money. They're buying revenue. Sure, the product is amazing, but it wouldn't be as amazing if offered at cost - which is exactly where "good enough" smaller and specialized models will survive.

Anthropic is selling API tokens at 80% margin.

And API is 80% of their business (subscriptions the other 20%)

But they're still not making money (apart from two quarters when they got massive discounts from xAI).

That’s by choice. Spend more than you make and you can claim no profit. They could become profitable overnight by cutting spending, though that would also be akin to switching from a run to a walk in the AI race.

And yet, they are highly unprofitable. Yes, people pay for the API because it's a frontier model, but it's a frontier model because of billions of capex that are (so far) not getting recouped. And if they stopped the capex on new frontier models, that API revenue would walk off to whoever else does. If, at some point, the entire industry decides to stop burning money and start squeezing customers, that will be the test of which business models actually survive, and in that scenario I am bullish on scrappier shops that can't possible compete on all fronts now.

They are selling api tokens at good margins. Of course they then reinvest all of it in research for new models and for continued growth. But the api inference is profitable.

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