Why Everybody Is Losing Money On AI

#1

Post by speckx » Fri, Sep 05, 2025, 4:55 PM UTC

Why Everybody Is Losing Money On AI
wheresyoured.at

Re: Why Everybody Is Losing Money On AI

#2

Post by candiddevmike » Fri, Sep 05, 2025, 5:18 PM UTC

This is a really well written article and contains references to back up the claims made. This part was mind blowing though:

> Cursor sends 100% of their revenue to Anthropic, who then takes that money and puts it into building out Claude Code, a competitor to Cursor. Cursor is Anthropic's largest customer. Cursor is deeply unprofitable, and was that way even before Anthropic chose to add "Service Tiers," jacking up the prices for enterprise apps like Cursor.

Re: Why Everybody Is Losing Money On AI

#3

Post by ciconia » Fri, Sep 05, 2025, 5:21 PM UTC

> total revenue: $4B > compute for training models: -$3B > compute for running models: -$2B > employee salaries: -$700M

Though not really representative of what users of said models may experience financially, at this point the question should be raised: if AI compute is 7x more expensive than developer salaries, what's the point? I thought the whole idea was to save money on human resources...

Re: Why Everybody Is Losing Money On AI

#4

Post by [deleted] » Fri, Sep 05, 2025, 5:23 PM UTC

[deleted]

Re: Why Everybody Is Losing Money On AI

#5

Post by eu » Fri, Sep 05, 2025, 5:23 PM UTC

so the bubble will burst at some point…

Re: Why Everybody Is Losing Money On AI

#6

Post by FL33TW00D » Fri, Sep 05, 2025, 5:24 PM UTC

"Please don't waste your breath saying "costs will come down." They haven't been, and they're not going to."

Yes, every new technology has always stayed exorbitantly priced in perpetuity.

Re: Why Everybody Is Losing Money On AI

#7

Post by umbauk » Fri, Sep 05, 2025, 5:24 PM UTC

I mean, we know everyone is losing money on AI. I thought from the title it was going to explain why. As in, why are they choosing to lose all that money?

Re: Why Everybody Is Losing Money On AI

#8

Post by candiddevmike » Fri, Sep 05, 2025, 5:25 PM UTC

umbauk wrote: post #7

I mean, we know everyone is losing money on AI. I thought from the title it was going to explain why. As in, why are they choosing to lose all that money?

Irrational exuberance

Re: Why Everybody Is Losing Money On AI

#9

Post by mewpmewp2 » Fri, Sep 05, 2025, 5:25 PM UTC

I'm not making any claims as to whether AI will become profitable or when, but if there's a new tech that has high potential or is highly desirable, I think it's expected that initially money will be lost.

Simply because strategically if there's high long term potential, it initially makes sense to put more money in than you get out of.

Not saying that AI is this, but if you determined that you have a golden goose that laid out 10 trillion USD worth of eggs when it got 10 years old, how much would you pay for it in the auction, and what would you have to show for it for the initial 9 years?

Now what if the golden goose scaled to 10 trillion each year linearly? First years people sound of mind would overpay for what it makes.

Re: Why Everybody Is Losing Money On AI

#10

Post by sejje » Fri, Sep 05, 2025, 5:26 PM UTC

ciconia wrote: post #3

> total revenue: $4B > compute for training models: -$3B > compute for running models: -$2B > employee salaries: -$700M Though not really representative of what users of said models may experience financially, at this point the question should be raised: if AI compute is 7x more expensive than developer salaries, what's the point? I thought the whole idea was to save money on human resources...

Someday (probably), a model will be trained once that is better than a human at coding, and it will only need trained once.

It can then be used indefinitely for the cost of inference, which is cheap and will continue getting cheaper.