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Why Wall Street is ignoring big tech's debt [video]

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Re: Why Wall Street is ignoring big tech's debt [video]

#131

Post by ofjcihen »

phyalow wrote: post #27
TrackerFF wrote: post #16

Earlier quoted context omitted.

But the question is how much are people willing to pay for AI. I use AI every day at work, but I only pay $20. That's the most I will ever want to pay. And, so far, it gives me everything I need. If OpenAI or Anthropic suddenly said "Sorry, the game is up. You'll have to pay $100/month now", I would 100% look into cheaper Chinese solutions. I suspect the AI subscription (or API) economy is whale economy. You have a s…

I spent $18k in credits last month, I have 3x 20x Anthropic accounts (for Fable to bypass limits) which runs me another $600ish p/m and then a chatgpt pro account another $200 p/m. The value I got out of it is easily 1-200x what I paid.

Honestly with that kind of usage how do you even know what you’re delivering?

Re: Why Wall Street is ignoring big tech's debt [video]

#132

Post by StevePrefontain »

jmathai wrote: post #121
WarmWash wrote: post #9

I don't know a single white collar worker who isn't using AI for their job. Not like forced, but like "Oh damn, this bot thing can do a lot of tedious leg work for me". To think that people won't pay $60-$80/mo to continue using it is wild to me. In a white collar environment it pays for itself in a few hours of use. If you focus on how much value AI brings to people (mostly in time saved), the bubble hardly looks bu…

I avoid subscriptions like the plague and I was getting enough value from Claude that I was paying for the Max plan for a couple months. I don't know how much Anthropic needs to make to be sustainable but I think it's worth north of $50 or $100 per month for many knowledge workers.

I highly doubt anything more than a small single-digit percent of users are willing to pay $50-100 for a Claude subscription themselves. Just like everything else (if your company isn’t paying for a seat) 90% of people will just use the free tier, 7-8% will use the first paid tier, 2-3% use some kind of power user plan. It could end up being a whale-driven business model in the end.

Re: Why Wall Street is ignoring big tech's debt [video]

#133

Post by amluto »

cm2187 wrote: post #71
TrackerFF wrote: post #16

Earlier quoted context omitted.

But the question is how much are people willing to pay for AI. I use AI every day at work, but I only pay $20. That's the most I will ever want to pay. And, so far, it gives me everything I need. If OpenAI or Anthropic suddenly said "Sorry, the game is up. You'll have to pay $100/month now", I would 100% look into cheaper Chinese solutions. I suspect the AI subscription (or API) economy is whale economy. You have a s…

The video quotes sales of $2.5 trillion a year to payoff those investments. What workforce you divide it by is a bit up in the air, but let's use 500 millions, which is basically 100% of the workforce of US + Europe + some change. That gives you around $500 a month per employee (from hedge fund manager to flipping burgers at McDonald's). And there will be competition. I see zero moat right now. The user specific part…

Speaking of user experience: OpenAI has some pretty cool tools, some of which even have decent UX. But I’m amazed that anyone can get real work done with the first party web UI. It is UNBELIEVABLY LAGGY. It makes GitHub seem snappy. It scrolls to a black screen and slowly populates later. It takes tens of seconds to load conversations. On the rare occasions that I’ve tried the fun “ask Pro mode a math question” I think I’ve spent 15 minutes waiting for content to populate in the UI. Oh, and all the obvious features like forking a chat either don’t exist or are somehow hidden. This is on a top-of-the-line client machine.

Maybe other users are doing something differently or are being served a different front end JavaScript blob?

Re: Why Wall Street is ignoring big tech's debt [video]

#134

Post by casey2 »

WarmWash wrote: post #9

I don't know a single white collar worker who isn't using AI for their job. Not like forced, but like "Oh damn, this bot thing can do a lot of tedious leg work for me". To think that people won't pay $60-$80/mo to continue using it is wild to me. In a white collar environment it pays for itself in a few hours of use. If you focus on how much value AI brings to people (mostly in time saved), the bubble hardly looks bu…

Why $60/mo when you can pay $5? Why $5 when you can pay $1. Unless you happen to be in one of the industries OpenAI focuses on you would always just use a Chinese model. Even now, but especially in the next 1-5 years.

Re: Why Wall Street is ignoring big tech's debt [video]

#135

Post by amluto »

WarmWash wrote: post #9

I don't know a single white collar worker who isn't using AI for their job. Not like forced, but like "Oh damn, this bot thing can do a lot of tedious leg work for me". To think that people won't pay $60-$80/mo to continue using it is wild to me. In a white collar environment it pays for itself in a few hours of use. If you focus on how much value AI brings to people (mostly in time saved), the bubble hardly looks bu…

> Did Uber die when a trip across town went from $3 to $13? No. It's giving more rides than ever, 10x more than when it was $3.

Uber has a fairly large moat: the regulatory mess they’ve waded through and the collection of drivers willing to drive for them. Sure, it’s probably easier to start a competitor now than 20 years ago, but there’s still a substantial network effect — a transportation service needs a lot of cars to provide good service, and they need a lot of users to keep those cars busy.

An AI service like chatgpt.com or claude.ai costs literally billions of dollars to develop, except that several Chinese companies are currently happy to spend that money and release the models and weights for free. And even a small company can rent the datacenter capacity they need, at least at moderate scale, and they only need enough scale to reliably fill up the batches on a handful of servers. There is no obvious network effect — a tiny Uber with a total of two cars in a city is useless, but a tiny AI provider that only services 2000 users is just fine as long as someone else provides the models weights.

And the costs to run these services keep coming down. The numbers people are reporting for unquantized DeepSeek v4 Flash 0731 on 2x RTX 6000 Pro [0] using open weight models and open source inference stacks are astounding, and one single copy of this could probably cover the entire inference usage of a decent sized business doing the kind of desk work that OpenAI and Anthropic could need to monetize to cover their expenses. (Using bespoke models has value but may reduce available usage of a single inference machine. Quantizing can make everything cheaper and is often good enough.)

This is not to say that these companies won’t make it on the strength of their enterprise offerings (never underestimate the willingness of enterprises to overpay for services they’re already using or by becoming the next Googles and finding other revenue sources beyond just inference.

[0] I admit to some skepticism that the pile of sketchy, obviously AI-generated patches to SGLang that allegedly achieve this are doing what the say they’re doing, but the point stands.

Re: Why Wall Street is ignoring big tech's debt [video]

#136

Post by etempleton »

intended wrote: post #37
phyalow wrote: post #27

Earlier quoted context omitted.

I spent $18k in credits last month, I have 3x 20x Anthropic accounts (for Fable to bypass limits) which runs me another $600ish p/m and then a chatgpt pro account another $200 p/m. The value I got out of it is easily 1-200x what I paid.

Examples like this come up as sub comments very often, but they don’t address the point. Most people will not go beyond $20, forget a 18k.

Most people won’t go beyond free. A lot of people will spend $20 and some will go above $50.

Re: Why Wall Street is ignoring big tech's debt [video]

#137

Post by etempleton »

tristanj wrote: post #91
root-parent wrote: post #88

Earlier quoted context omitted.

Google funds Anthropic | v Anthropic promises to rent Google's TPUs | v Google guarantees the infrastructure needed to fulfil Anthropic's promise | v Wall Street lends against Google's guarantee | v Borrowed money buys Google-designed TPUs | v The TPU purchases "prove" demand for Google TPUs | v Anthropic's compute capacity and valuation rise | v Google's investment in Anthropic rises in value | v Higher valuations j…

Anthropic has 80%+ margins on inference. Google has 30%+ margins on compute. Both parties have discovered a literal money printer. The payback period is At those unit economics, anyone not borrowing aggressively here to create more money printers is a moron.

Why do they both need to keep borrowing so much money if the margins are so fat?

Re: Why Wall Street is ignoring big tech's debt [video]

#138

Post by etempleton »

tristanj wrote: post #97
stackskipton wrote: post #95

Earlier quoted context omitted.

>Anthropic has 80%+ margins on inference. That's like saying my delivery company is profitable because with current gas prices, my margin is 80%. Yea, what about all money you spent to get there? You still profitable then?

Yes, actually. Anthropic has gross margins of 40%+, hit $75B ARR last month, and (as of this quarter) is profitable.

You have to assume that they aren’t being too creative with their accounting, which Anthropic and Open AI most certainly are.

Re: Why Wall Street is ignoring big tech's debt [video]

#139

Post by memonkey »

gedy wrote: post #67
jrflo wrote: post #61

Earlier quoted context omitted.

But AI use translates directly to time savings (if it works). You only need 1-2 hours of time savings per employee per week to break even on a $100/seat/month subscription.

That's not how people mentally price things though, i.e. "streaming is so much cheaper than the movie theaters!", etc

How do people mentally price things. I'm on the fringe but I'm willing to pay $60 for a AAA 60 hour game that I'm positive I won't finish but am find if I get 6-10 hours out of it.

Re: Why Wall Street is ignoring big tech's debt [video]

#140

Post by surajrmal »

TrackerFF wrote: post #16
WarmWash wrote: post #9

I don't know a single white collar worker who isn't using AI for their job. Not like forced, but like "Oh damn, this bot thing can do a lot of tedious leg work for me". To think that people won't pay $60-$80/mo to continue using it is wild to me. In a white collar environment it pays for itself in a few hours of use. If you focus on how much value AI brings to people (mostly in time saved), the bubble hardly looks bu…

But the question is how much are people willing to pay for AI. I use AI every day at work, but I only pay $20. That's the most I will ever want to pay. And, so far, it gives me everything I need. If OpenAI or Anthropic suddenly said "Sorry, the game is up. You'll have to pay $100/month now", I would 100% look into cheaper Chinese solutions. I suspect the AI subscription (or API) economy is whale economy. You have a s…

If they can get productivity increases equivalent to .1% it pays for itself. That's roughly equivalent to firing 1 in 1000 employees to finance the software.
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