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Is AI Profitable Yet?

isaiprofitable.com

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Re: Is AI Profitable Yet?

#181

Post by tim333 »

Technically, the site doesn't show profits, it shows something like cash flow excluding investment flows, or has more money been spent than has come back in from customers.

This will always be negative for any new business as you are effectively depreciating the assets straight away. Like if you build a hotel and deduct the cost of building it from room income - it would take years before you get the money back but may be quite profitable with GAAP accounting.

GAAP accounting (Generally Accepted Accounting Principles) is what's used for official reporting and tax returns but excludes any increases in IP value or goodwill unless there's a buyout. If you included those the likes of OpenAI or Anthropic would have done pretty well. I'm not sure there's a word for that but basically value of the business less the money that's gone in. It doesn't get reported because 'value of the business' is guesswork and can be prone to BS but is pretty important to real world outcomes. AI is probably doing well on that one. Maybe why

>Is AI Profitable Yet? NO. Everyone's Broke.

doesn't fit with the top companies on the list having many billions in the bank.

Re: Is AI Profitable Yet?

#184

Post by ch_fr »

rdl wrote: post #164
abathologist wrote: post #58

Earlier quoted context omitted.

Oh really? A 195% cost to revenue ratio isn't bad at all? I'm not a biz expert, but I spent a few minutes looking this up (e.g., what are usual cost-to-revenue ratios for new lines of business), and this sounds like BS to me.

If "cost" is mostly capital investments, absolutely. Normally you'd use operating cost (which for capital equipment would be depreciation and interest), and here they are using the capital cost as full cost. No one really knows how quickly AI hardware investments will become obsolete and thus how long it should be amortized, but 2-3 years would be extremely conservative, and in fact used H100 (discontinued/2 generati…

But if it's fully being amortized, then it means they don't buy new Nvidia GPUs anymore for a while. The situation is either "your GPU AND the datacenter infrastructure it's running on is obsolete", or "Nvidia's profits tank because people are staying with current-level infrastructure".

Re: Is AI Profitable Yet?

#185

Post by ch_fr »

ekianjo wrote: post #122

Most startups are deep in the red for years before they even have any revenue. Is that any different?

The difference between serving 1 and 1 billion http queries is not the same as the difference between generating 1 and 1 billion tokens.

The startup blitz-scaling-market-capturing playbook makes makes sense when you spend to scale, not when you spend because you scale, yeah, I understand that step 2 is "and now you squeeze the users", but it will need to be by such a bigger factor...

Re: Is AI Profitable Yet?

#186

Post by sarchertech »

JimDabell wrote: post #145
sarchertech wrote: post #125

Earlier quoted context omitted.

> There are large open weights models that companies run at a profit while charging far less than what OpenAI and Anthropic charge. You have no idea whether those companies are making a profit. 1. All it takes is one of them operating a loss to gain market share to force the other ones to lower prices to compete. 2. There’s not reason to expect that these relatively small companies are correctly pricing GPU depreciat…

When I go to Amazon and pay them for DeepSeek inference, do you think that Amazon are subsidising that?

It’s a brand new market that they want to claim a share of. I doubt they would be making much money of selling deepseek inference right now even if it were profitable, so why not throw sum subsidies at it for a little while in the hope that you are one of the big names left standing once everyone runs out of money.

Re: Is AI Profitable Yet?

#187

Post by sarchertech »

Aurornis wrote: post #144
sarchertech wrote: post #125

Earlier quoted context omitted.

> There are large open weights models that companies run at a profit while charging far less than what OpenAI and Anthropic charge. You have no idea whether those companies are making a profit. 1. All it takes is one of them operating a loss to gain market share to force the other ones to lower prices to compete. 2. There’s not reason to expect that these relatively small companies are correctly pricing GPU depreciat…

> You have no idea whether those companies are making a profit. I doubt the various providers on OpenRouter are benevolently operating at a loss because they’re so generous. You can also calculate the cost to run these models yourself. They are open weight and the hardware required to run them is not a secret. They can be modeled and many have done the business modeling. I’m always surprised at how many Hacker News c…

Selling a brands new project at a loss to gain market share or to compete with other companies doing it because you hope you can outlast them isn’t being benevolent or generous.

If you want to link to a specific cost analysis that was performed by someone without a vested interest in generating hype then do it and we’ll discuss that.

Because what you wrote sounds an awful lot like “let me tell you a lot of very smart people are saying it.”

Re: Is AI Profitable Yet?

#189

Post by JimDabell »

sarchertech wrote: post #186
JimDabell wrote: post #145

Earlier quoted context omitted.

When I go to Amazon and pay them for DeepSeek inference, do you think that Amazon are subsidising that?

It’s a brand new market that they want to claim a share of. I doubt they would be making much money of selling deepseek inference right now even if it were profitable, so why not throw sum subsidies at it for a little while in the hope that you are one of the big names left standing once everyone runs out of money.

You didn’t answer my question: do you think they are doing this?

AWS already have a strategy in place for what you describe. They are very liberal in giving out credits. They don’t do it by subsidising prices.

Re: Is AI Profitable Yet?

#190

Post by spwa4 »

sfifs wrote: post #165
7thpower wrote: post #146

Earlier quoted context omitted.

With this line of thinking, nobody would have ever built refineries, or fabs, or clouds. The frontier labs have fantastic margin on inference. You do not understand how fantastic. And they have license to change inputs at will based on profitability. They are not only innovating on models and tooling, they are innovating on cogs (I wrote this btw, and I’m not going to stop writing this way because Claude discovered i…

> The frontier labs have fantastic margin on inference. You do not understand how fantastic. And they have license to change inputs at will based on profitability. This. The gross margin on inference is at least 95% if not higher - several open weight models on my tiny consumer DGX Spark easily replace the 15 dollars a day I was paying in tokens for Claw usage with a dollar a day electricity. You add data centre over…

To say nothing of the fact that they can just add "figure out how to change the answer to this question to benefit X" at the top of their system query.

It is baffling that any government lets either themselves or their local companies use these tools. Utterly baffling. The potential for total security compromise through these models is ... essentially 100%.

But ... it's slightly cheaper.

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