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Outsourcing plus local AI will soon become more economical vs. frontier labs

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Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#21

Post by CuriouslyC »

seniorivn wrote: post #10
frank_nitti wrote: post #8

Earlier quoted context omitted.

Not my comment, but I’d venture to guess they’re referring to the likes of DeepSeek et al, who are/will be able to host their top-tier inference infra more efficiently

right now the most likely outcome is that they are going to host locally produced much more power hungry chips, and even if the lead on electricity production will stay, it will be eaten by inefficiency of the hardware.

Unlikely. We have a big lead in terms of general computing devices, but China can leapfrog us with ASICs. They might still lag in the training space for a while but in terms of serving inference, USA is absolutely COOKED at the low-mid end.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#24

Post by crimsoneer »

I think this is a compelling argument, but I think 2 issues:

1. I remain unconvinced LocalAI can work well for majority of businesses. It looks vaguely comparable on benchmarks, but it tends to be fragile and a lot of management overhead in reality.

2. Similarly, while Deepseek is comparable to Opus/Codex on benchmarks, for agentic work at scale I definitely notice the difference. That's not to say it's not economical, just that I definitely miss the big boys when I swap.

I kind of wish this was true, because the UK would be in a great place to compete with the US. But somehow people are happy to pay 3x the salary for an engineer in SF.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#25

Post by SpicyLemonZest »

Aboutplants wrote: post #15
jqpabc123 wrote: post #2

The current closed source frontier models are more capable than the latest from DeepSeek. But is the capability difference enough to justify a 30x price difference? "Frontier models" are caught in a financial dilemma of their own making --- they have spent such huge sums on development and as a result, they may have inadvertently priced themselves out of the market. Energy costs are a huge factor for AI. He who has t…

I’ve been on this issue for a while now, models are not going to matter as much in the future. Pure energy cost will be the determining factor in who is most successful. The US just cannot build cheap energy the way other China can and at the scale that China will build it. 10 years from now it will be seen as the single source of advantage

If the cost of software development falls so precipitously that energy costs are a driving factor, that implies so many other changes that I don't know how we can trust any analysis of what would happen.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#26

Post by ianhxu »

>frontier models are more capable than the latest from DeepSeek. But is the capability difference enough to justify a 30x price difference?

The contradiction here is that without frontier models, there'd be no foundation for models like DeepSeek to reference and catch up to. Is there an economic model that captures this kind of dynamic?

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#27

Post by CuriouslyC »

rgbrenner wrote: post #18
GodelNumbering wrote: post #4

Earlier quoted context omitted.

> lowest energy costs will likely be able to dictate market prices This is a good insight. I think everyone has seen that chart China's electricity generation going parabolic vs the US. That combined with cheaper yet equally good talent means at least in that segment, the closed labs won't catch up anytime soon

> China's electricity generation going parabolic Even if we all switch to Chinese models, the west isn't going to be running the model on Chinese servers... and the majority of costs are from inference. > cheaper yet equally good talent China has tech talent, but this isn't a 3rd world developing nation. Chinese AI researchers are getting paid $10M+ USD/year salaries. Also they're equally good, but somehow consistent…

Training models is as much art as science at this point. There's no gap in scientific acumen at Chinese labs, but the US has more real world experience in the art of training large models, and the US has the capital allocation lead.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#28

Post by treis »

I think this misses the forest for the trees. Working with ChatGPT is eerily similar to working with offshore Indian devs back in my enterprise days. Productive if guided explicitly but if let run wild there's lots of WTF moments.

LLMs are likely to replace outsourced devs because your employees that know the context can use LLMs to do what offshore devs did before.

Re: Outsourcing plus local AI will soon become more economical vs. frontier labs

#30

Post by treis »

throwfaraway4 wrote: post #17
treis wrote: post #12

Earlier quoted context omitted.

Historically the winners in software have a flywheel that turns faster with more users. Facebook the more of your friends on it the better the product was. Google tracked how long users were on pages to improve search. The frontier models are going to win that way. They won't feed your code back into the system but they will track which code you keep and what code gets a "try again claude". They're not going to lose…

>They're not going to lose on price. No consumer software ever has Lists examples of software that are free to the users

Go on...
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