It's addressed poorly.
> First, there's not that much motive to gain API market share with unsustainably cheap prices. Any gains would be temporary, since there's no long-term lock-in,
What? If someone builds something on top of your API, they're tying themselves to it, and you can slowly raise prices while keeping each increase well below the switching cost.
> Second, some of those models have been released with open weights and API access is also available from third-party providers who would have no motive to subsidize inference.
See above. Just like any other Cloud service, you tie clients to your API.
> Third, Deepseek released actual numbers on their inference efficiency in February. Those numbers suggest that their normal R1 API pricing has about 80% margins when considering the GPU costs, though not any other serving costs.
80% margin on GPU cost? What about after paying for power, facilities, admin, support, marketing, etc.? Are GPUs really more than half the cost of this business?
(EDIT: This is 80% margin on top of GPU rental, i.e. total compute cost. My bad.)
Guessing about costs based on prices makes no sense at this point. OpenAI's $20/mo and $200/mo tiers have nothing to do with the cost of those services -- they're just testing price points.