Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Are OpenAI and Anthropic losing money on inference?

martinalderson.com

Post reply on HN
Print view View original

31–40 of 495 posts

Re: Are OpenAI and Anthropic losing money on inference?

#31

Post by voxic11 »

JCM9 wrote: post #11
gruez wrote: post #7

Earlier quoted context omitted.

I think the point isn't to argue AI companies are money printers or even that they're fairly valued, it's that at least the unit economics work out. Contrast this to something like moviepass, where they were actually losing money on each subscriber. Sure, a company that requires huge capital investments that might never be paid back isn't great either, but at least it's better than moviepass.

Unit economics needs to include the cost of the thing being sold, not just the direct cost of selling it. Unit economics is mostly a manufacturing concept and the only reason it looks OK here is because of not really factoring in the cost of building the thing into the cost of the thing. Someone might say I don’t understand “unit economics” but I’d simply argue applying a unit economics argument saying it’s good with…

That isn't what unit economics is. The purpose of unit economics is to answer: "How much money do I make (or lose) if I add one more customer or transaction?". Since adding an additional user/transaction doesn't increase the cost of training the models you would not include the cost of training the models in a unit economics analysis. The entire point of unit economics is that it excludes such "fixed costs".

Re: Are OpenAI and Anthropic losing money on inference?

#32

Post by barrkel »

JCM9 wrote: post #11
gruez wrote: post #7

Earlier quoted context omitted.

I think the point isn't to argue AI companies are money printers or even that they're fairly valued, it's that at least the unit economics work out. Contrast this to something like moviepass, where they were actually losing money on each subscriber. Sure, a company that requires huge capital investments that might never be paid back isn't great either, but at least it's better than moviepass.

Unit economics needs to include the cost of the thing being sold, not just the direct cost of selling it. Unit economics is mostly a manufacturing concept and the only reason it looks OK here is because of not really factoring in the cost of building the thing into the cost of the thing. Someone might say I don’t understand “unit economics” but I’d simply argue applying a unit economics argument saying it’s good with…

There is no marginal cost for training, just like there's no marginal cost for software. This is why you don't generally use unit economics for analyzing software company breakeven.

Re: Are OpenAI and Anthropic losing money on inference?

#33

Post by martinald »

bgwalter wrote: post #18
martinald wrote: post #3

Earlier quoted context omitted.

Yeah but they can probably monetize them with ads.

I'm not so sure. Inserting ads into chatbot output is like inserting ads into email. People are more reluctant to tolerate that than web or YouTube ads (which are hated already). If they insert stealth ads, then after the third sponsored bad restaurant suggestion people will stop using that feature, too.

Mmm let's see. I think in LLM ads are probably have the most intent (and therefore most value) of any ads. They are like search PPC ads on steroids as you have even more context of what the user is actually looking for.

Hell they could even just add affiliate tracking to links (and not change any of the ranking based on it) and probably make enough money to cover a lot of the inference for free users.

Re: Are OpenAI and Anthropic losing money on inference?

#34

Post by hugedickfounder »

jonathan-adly wrote: post #16

Basically- the same math as modern automated manufacturing. Super expensive and complex build-out - then a money printer once running and optimized. I know there is lots of bearish sentiments here. Lots of people correctly point out that this is not the same math as FAANG products - then they make the jump that it must be bad. But - my guess is these companies end up with margins better than Tesla (modern manufacture…

the difference is you can train on outputs deepseek style, there are not gates in this field profit margins will go to 0

Re: Are OpenAI and Anthropic losing money on inference?

#35

Post by kgwgk »

artursapek wrote: post #22
Aurornis wrote: post #14

Earlier quoted context omitted.

> You have to include all the costs associated with the model, not just inference. The title of the article directly says “on inference”. It’s not a mistake to exclude training costs. This is about incremental costs of inference.

Hacker News commenters just can't help but critique things even when they're missing the point

Your comment may apply to the original commenter “missing” the point of TFA and to the person replying “missing” the point of that comment. And to my comment “missing” the point of yours - which may have also “missed” the point.

Re: Are OpenAI and Anthropic losing money on inference?

#36

Post by ForHackernews »

JCM9 wrote: post #4

These articles (of which there are many) all make the same basic accounting mistakes. You have to include all the costs associated with the model, not just inference compute. This article is like saying an apartment complex isn’t “losing money” because the monthly rents cover operating costs but ignoring the cost of the building. Most real estate developments go bust because the developers can’t pay the mortgage paym…

> if you have healthy positive cash flow you have much better mechanisms available to fund capital investment other than selling shares. Eg issue a bond against that healthy cash flow.

Is that actually true in 2025? Presumably you have to make coupon payments on a bond(?), but shares are free. Companies like Meta have shown you can issue shares that don't come with voting rights and people will buy them, and meme stocks like GME have demonstrated the effectiveness of churning out as many shares as the market will bear.

Re: Are OpenAI and Anthropic losing money on inference?

#37

Post by Aurornis »

martinald wrote: post #13
JCM9 wrote: post #4

These articles (of which there are many) all make the same basic accounting mistakes. You have to include all the costs associated with the model, not just inference compute. This article is like saying an apartment complex isn’t “losing money” because the monthly rents cover operating costs but ignoring the cost of the building. Most real estate developments go bust because the developers can’t pay the mortgage paym…

(Author here). Yes I am aware of that and did mention it. However - what I wanted to push back in this article was that claude code was completely unsustainable and therefore a flash in the pan and devs aren't at risk (I know you are not saying this). The models as is are still hugely useful, even if no further training was done.

> The models as is are still hugely useful, even if no further training was done.

Exactly. The parent comment has an incorrect understanding of what unit economics means.

The cost of training is not a factor in the marginal cost of each inference or each new customer.

It’s unfortunate this comment thread is the highest upvoted right now when it’s based on a basic misunderstanding of unit economics.

Re: Are OpenAI and Anthropic losing money on inference?

#38

Post by Aurornis »

kgwgk wrote: post #35
artursapek wrote: post #22

Earlier quoted context omitted.

Hacker News commenters just can't help but critique things even when they're missing the point

Your comment may apply to the original commenter “missing” the point of TFA and to the person replying “missing” the point of that comment. And to my comment “missing” the point of yours - which may have also “missed” the point.

I’ve clearly “missed” the point you were trying to make, because there’s nothing complicated: The article is about unit economics and marginal costs of inferences and this comment thread is trying to criticize the article based on a misunderstanding of what unit economics means.

Re: Are OpenAI and Anthropic losing money on inference?

#39

Post by JCM9 »

With the heat turning up on AI companies to explain how they will land on a viable business model some of this is starting to look like WeWork’s “Community Adjusted EBITA” arguments of “hey if you ignore where we’re losing money, we’re not losing money!” that they made right before imploding.

I think most folks understand that pure inference in a vacuum is likely cash flow positive, but that’s not why folks are asking increasingly tough questions on the financial health of these enterprises.

Re: Are OpenAI and Anthropic losing money on inference?

#40

Post by hiatus »

gjsman-1000 wrote: post #5

If inference is that cheap, why is not even one company profitable yet?

A factory can make cheap goods and not reach profitability for some time due to the large capital outlay in spinning up a factory and tooling. It is likely there are large capital costs associated with model training that are recouped over the lifetime of the model.
Post reply on HN