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70% of AI revenue comes from OpenAI and Anthropic [video]

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Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#21

I think this whole premise is ignoring the point that most decently sized companies want to and eventually will be running their own LLM workloads. Currently use cases are limited by scope and imagination, and predominantly focused on cost efficiency. Once a use case becomes a top line revenue driver budgets will become essentially only limited by ROI. There are some inference workloads that are unacceptable to send…

> most decently sized companies want to and eventually will be running their own LLM workloads

And probably some decently sized states too. Not only commercial actors are up to the job.

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#22

I think this whole premise is ignoring the point that most decently sized companies want to and eventually will be running their own LLM workloads. Currently use cases are limited by scope and imagination, and predominantly focused on cost efficiency. Once a use case becomes a top line revenue driver budgets will become essentially only limited by ROI. There are some inference workloads that are unacceptable to send…

but this is just an absolute fantasy, what, exactly, will this compute be doing? Our lives are already deeply entwined with technology and use barely any compute. How could our lives become 100x more dependent on compute? You can be thrilled by this exciting technology and all the possibilities it brings without thinking it is going to require this huge capital investment in GPUs. You could radically change billions…

Push everybody to buy hardware they don’t need to constantly run agents for pretty basic tasks, such as processing your daily emails and sending you little summaries notifications. So, the most inefficient software tools ever produced, but that keeps the whole industry alive. That’s pretty much the vision Jensen Huang is selling to ensure NVIDIA continues to grow

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#23
post #4

Wasn't it always seen as a "winner takes all" business?

> Wasn't it always seen as a "winner takes all" business?

No. It was always a pyramid scheme marketed as a "winner takes all" business. But there's no winning. The only winners are those who cash out before it collapses. This is literally Web3 2.0.

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#24
post #2

Ai revenue or datacenter/compute revenue? There's a lot of circular financing right now and there's a pretty obvious bubble for sure but I haven't been able to figure out what exactly this guy's argument is after seeing it a few times recently. Like yeah most ai datacenter spend is those two companies - that's pretty standard monopoly (or monopsony for the cloud providers) dynamics. If you're saying some major percen…

One interpretation is that so called profitability is one 15 minute phone call between OpenAI and Anthropic to increase prices. If you think that antitrust is the reason that this won't happen, you've stated a speculation. Not a certainty.

They are pressured by open models to reduce prices, not increase

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#25

"Because Goldman does this kind of nonsense." Hilarious. You can agree or disagree with Zitron but he really has no business talking about Goldman Sachs. His posts are littered with evidence he has no ability to perform the type of financial analysis he thinks he does.

Mind sharing more details?

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#27
post #5
post #4

Wasn't it always seen as a "winner takes all" business?

There is no "all", that's the point. There is no pot of gold at the end of the AI rainbow.

There is some gold, but it’s a fairly small amount compared to the ATM discussed by AI companies (basically software generation, software security, audio transcripts, translation, image processing, image generation, search, etc). So it’s not like there won’t be an AI industry in the future but it won’t be absolutely everywhere the way the AI boosters are projecting. Inference will be a low margin industry, training will be capex constrained and likely low margin too. And some services on top will have decent margins. But nothing like the datacenters full of PHDs Amodei and Altman are dreaming about.

Just like any other technology

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#28
post #9

Earlier quoted context omitted.

There's a lot of money changing hands, at least that's a spoil isn't it? And if the music stops, someone is going to end up holding it.

Well a lot of money is being spent, but is a lot of money being made? With circular deals it’s hard to tell.

NVIDIA, Micron, SK Hynix, and other hardware manufacturers, and also hyperscalers are the ones making the hard cash (unless you’re Oracle, that company is more than fucked)

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#29

I think this whole premise is ignoring the point that most decently sized companies want to and eventually will be running their own LLM workloads. Currently use cases are limited by scope and imagination, and predominantly focused on cost efficiency. Once a use case becomes a top line revenue driver budgets will become essentially only limited by ROI. There are some inference workloads that are unacceptable to send…

Is anyone really running GPU databases in prod at scale? Or are you assuming that the GPU compute from a crash will become so cheap that it makes this niche scale?

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#30
post #25

"Because Goldman does this kind of nonsense." Hilarious. You can agree or disagree with Zitron but he really has no business talking about Goldman Sachs. His posts are littered with evidence he has no ability to perform the type of financial analysis he thinks he does.

Mind sharing more details?

Sure. Here's an example:

https://www.wheresyoured.at/exclusive-openai-financials/

Zitron wrote:

> Additional factors – including interest income and interest expense – left it with a net loss of $8.84 billion. It then marked $3.74 billion of losses as “net loss attributable to noncontrolling members capital,” leaving the net loss attributable to the company as $5.09 billion.

> It’s unclear what this means, nor how OpenAI reconciled the removal of $3.74 billion in costs. I will not speculate further.

It is very clear what this means, and no speculation is required if you understand basic consolidation accounting, which you would expect someone in his position to understand.

It's not rocket science: when you have a parent company with entities it doesn't wholly own, the slice of losses belonging to the other equity holders is split out as "noncontrolling interests." Nothing is removed or hidden; the total loss is unchanged, it's just allocated to reflect that the parent company doesn't own the whole. Framing it as OpenAI removing costs implied something sketchy and requiring speculation where there's only routine GAAP accounting.

But it's even worse than this. So many of Ed's claims conflate the foundational R&D and capital expenditures these companies are incurring with the unit economics of their businesses. He seems woefully unable to understand that you could sped gobs of money on the former and still have positive gross margins that scale over time with the latter.

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