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AI subscriptions are a ticking time bomb for enterprise

thestateofbrand.com

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Re: AI subscriptions are a ticking time bomb for enterprise

#11

Post by riddlemethat »

m0llusk wrote: post #9
returnInfinity wrote: post #3

Brad Gerstner confirmed that tokens aren't being sold at a loss. Whatever the formula, API + Subscription split, the companies are making a profit on net token sale. They maybe running at loss after all the salaries and stock comp, but tokens are in profit now.

That isn't enough. Over time the need for growth and increasing profits will squeeze existing margins.

Open source models apply pressures on the low end of the market. The paid models are so much better that they can charge based on value for enterprises.

Re: AI subscriptions are a ticking time bomb for enterprise

#12

Post by atq2119 »

gizmodo59 wrote: post #10

Inference is profitable. Companies lose money because: 1. Training is expensive. Not just compute but getting the data, researchers salaries etc 2. You have to keep producing new models to ensure people use your inference and there seems to be no end to this. So they have to pour more billions to keep the cycle going on 3. People salary and other admin cost are not that high compared to 1 and 2.

Inference at per-token pricing is profitable.

The article's point is that if you're relying on flat fee subscriptions, a rude awakening may be coming. That seems plausible to me. Issues around token quotas are a frequent topic on HN.

Re: AI subscriptions are a ticking time bomb for enterprise

#13

Post by simonw »

This article appears to be self-confessed algorithmic clickbait. They say as much in this piece: https://www.thestateofbrand.com/news/Outlever-Owned-Media-Ne...

> Our content technology stack is built on AI and proprietary models trained on thousands of hours of executive interviews across industries. As we operate this publication, the system learns from the editorial decisions we make, the audience responses we see, and the distribution patterns that emerge from daily publishing. Those learnings refine the models, improve the workflows, and sharpen the distribution logic.

Re: AI subscriptions are a ticking time bomb for enterprise

#14

Post by einrealist »

Those price increases will increase the pressure to use cheaper / free models (commoditization), thus cutting into the revenue projections of the frontier model vendors. Its going to be exciting to see what happens to these huge investments and valuations.

Re: AI subscriptions are a ticking time bomb for enterprise

#15

Post by ainch »

returnInfinity wrote: post #3

Brad Gerstner confirmed that tokens aren't being sold at a loss. Whatever the formula, API + Subscription split, the companies are making a profit on net token sale. They maybe running at loss after all the salaries and stock comp, but tokens are in profit now.

Tokens can be sold at profit, but 70% of compute expenditure goes to R&D and model training[0]. Inference needs to cover all of that as well as being profitable in a vacuum.

[0] https://epoch.ai/data-insights/openai-compute-spend

Re: AI subscriptions are a ticking time bomb for enterprise

#16

Post by fg137 »

gizmodo59 wrote: post #10

Inference is profitable. Companies lose money because: 1. Training is expensive. Not just compute but getting the data, researchers salaries etc 2. You have to keep producing new models to ensure people use your inference and there seems to be no end to this. So they have to pour more billions to keep the cycle going on 3. People salary and other admin cost are not that high compared to 1 and 2.

So? How does it change the equation?

Nobody is going to charge "inference price" for model usage.

Re: AI subscriptions are a ticking time bomb for enterprise

#17

Post by ghusto »

TL;DR to save you time:

1. GenAI companies are making a loss in order to gain adoption and later lock-in

2. ???

3. They're going to cash-in soon and start milking you now that business critical systems rely on GenAI

The "???" denotes a complete failure to offer compelling arguments that link 1 and 3.

Re: AI subscriptions are a ticking time bomb for enterprise

#19

Post by hypercube33 »

m0llusk wrote: post #9
returnInfinity wrote: post #3

Brad Gerstner confirmed that tokens aren't being sold at a loss. Whatever the formula, API + Subscription split, the companies are making a profit on net token sale. They maybe running at loss after all the salaries and stock comp, but tokens are in profit now.

That isn't enough. Over time the need for growth and increasing profits will squeeze existing margins.

I think for a while this is possible - the models definitely aren't as efficient as they can be as we've seen a lot of promising papers over the last year about how people are changing pieces and parts to do more with less. None of it has come to market yet that I'm aware of so for now it's just a hope I suppose but things like Opus definitely burn a ton of compute to be the leader in benchmarks but the gaps are closing.
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