“So the Chinese labs have thrown a lifeline to the Western loss-making labs, and I just have no clue as to why.”
I don’t think it is intentional but this is actually quite bad for the western labs.
The entire booster narrative has been “look at how their revenue is growing! $10bn to $100bn ARR in under a year! This’ll be a multi-trillion IPO!” and the extrapolated future growth from $100bn to $500bn and $500bn to $1tn justified future investment… but that revenue was just because inference was expensive.
The revenue growth story is all that matters pre-IPO. If revenue falls from $100bn to $50bn that’s very very bad optics for OpenAI and Anthropic even if they are now profitable, it completely destroys the growth narrative.
I don't see why revenue has to fall even if marginal costs drop off a cliff. As long as they have the best models (perceived or otherwise) and can make security and IP guarantees that satisfy enterprise, and no firm with similar guarantees undercuts them on price (why would they want a race to the bottom?) they can have high revenue and high margin.
unless the major players collude they don’t get decide if they are in a race to the bottom. The best model was compelling 6 months ago when everyone was too impressed to care about price but that has worn off now and clients are paying attention to price. The best model is no longer a license to charge any amount.
The thing about "collusion" is that all you have to do is not lower your prices, and raise prices when your competitors do. It's not actually collusion unless you coordinate.
It is funny that so many comments vascilate between "It is so expensive these companies can't make money and will go bankrupt in seconds" and "Inference is so cheap that these companies can't make money and will go bankrupt in seconds".
I never take them seriously, I just assume they are coming from countries that don't understand how capitalism works or are operating out of bad faith. The underlying reality of the market is always changing and needs are always changing. Some AI companies will fail, that is a given. Remember alta-vista? Yahoo? Did search go away? How about Microsoft phones? Nokia? Motorola?
OpenAI and Anthropic are not in the inference business. That is a commodity. They need to sell products and solutions.
They’re not contradictory positions. Inference is too expensive now to make money because the industry is immature and hasn’t yet optimized for financial success while customers don’t care much about price because they’re more concerned about not missing out.
Inference will be too cheap long term to make money because it is being commoditized and customers will start to care about results and not just be wowed by impressive technology.
And of course this technology will continue to exist but that is irrelevant to the business. OpenAI investors don’t care if LLMs exist in 10 years, they care if their investment in OpenAI has made money.
How much conclusive evidence people need to stop parroting that inference is expensive? Literally this article is another example showing it's cheap and just got massively cheaper.
The article is about how a month ago a new approach allowed inference costs to be cut substantially. Anthropic currently spend over $5bn per month on compute and have over $400bn in committed spend over the next 5 years. Inference is, by any measure, expensive, it’s just now getting less expensive.
Relative to traditional software margins, the type of margins we are all used to, inference is obscene.
I was about to say, one take I've heard is that the party ideology considers profit a kind of "rent" in a derogatory way, and consequently seeks to undermine the ability of western companies to collect large profit margins
reticulates · · focus · HN ↗
I don’t think it is intentional but this is actually quite bad for the western labs.
The entire booster narrative has been “look at how their revenue is growing! $10bn to $100bn ARR in under a year! This’ll be a multi-trillion IPO!” and the extrapolated future growth from $100bn to $500bn and $500bn to $1tn justified future investment… but that revenue was just because inference was expensive.
The revenue growth story is all that matters pre-IPO. If revenue falls from $100bn to $50bn that’s very very bad optics for OpenAI and Anthropic even if they are now profitable, it completely destroys the growth narrative.
DangitBobby · · focus · HN ↗
dominotw · · focus · HN ↗
DangitBobby · · focus · HN ↗
reticulates · · focus · HN ↗
DangitBobby · · focus · HN ↗
bobmcnamara · · focus · HN ↗
DangitBobby · · focus · HN ↗
altcognito · · focus · HN ↗
I never take them seriously, I just assume they are coming from countries that don't understand how capitalism works or are operating out of bad faith. The underlying reality of the market is always changing and needs are always changing. Some AI companies will fail, that is a given. Remember alta-vista? Yahoo? Did search go away? How about Microsoft phones? Nokia? Motorola?
OpenAI and Anthropic are not in the inference business. That is a commodity. They need to sell products and solutions.
reticulates · · focus · HN ↗
Inference will be too cheap long term to make money because it is being commoditized and customers will start to care about results and not just be wowed by impressive technology.
And of course this technology will continue to exist but that is irrelevant to the business. OpenAI investors don’t care if LLMs exist in 10 years, they care if their investment in OpenAI has made money.
TeMPOraL · · focus · HN ↗
reticulates · · focus · HN ↗
Relative to traditional software margins, the type of margins we are all used to, inference is obscene.
Bjorkbat · · focus · HN ↗
maxglute · · focus · HN ↗
Western labs: Not like that!