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AI's Affordability Crisis

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Re: AI's Affordability Crisis

#71

Post by 827a »

> Zitron's numbers don't tell us the real cost of generating tokens but, subject to the assumption that the platforms are not subsidizing the token price, that means Anthropic is subsidizing their enterprise customers by up to 40 times, and OpenAI up to 70 times

Neither Anthropic nor OpenAI are subsidizing enterprise customers. Neither Anthropic nor OpenAI allow Business nor Enterprise customers access to the high value $200/mo plan. Both organizations have moved to a "cheaper plan per user + API Pricing after that" (e.g. $20/mo + usage). The $100/$200/mo plans are for individuals only (of course, many individuals use these plans at work, but that's beside the point; they aren't selling this plan to enterprises).

> SemiAnalysis also analyzed the platform's gross margins, implausibly assuming that tokens were priced at 4 times the cost of generating them and: With the current subsidies, all it takes for a user to have a gross margin of at best negative 25% is for them to use as little as 25% of their rate limit.

The article's source for this claim is not SemiAnalysis; its Zitron. But once you dig through his article, Zitron links to a SemiAnalysis tweet [1] where they, as the paragraph states, implausibly assume gross margins of 75% to come up with their weird analysis of the subscription plans. Citing this for anything is weird, because afaik that 75% number is a total shot in the dark. We have no clue what their margins are. My take is that the only reason that 75% number is implausible is because it may underestimate the inference margins of Ant/OAI's API pricing.

[1] https://x.com/SemiAnalysis_/status/2064815045767213400?ref=w...

Re: AI's Affordability Crisis

#72

Post by avereveard »

> Anthropic is subsidizing their enterprise customers by up to 40 times, and OpenAI up to 70 times

might as well be the other way around with non subscribed token being 50x overpriced, or any combination thereof

also uber was non profitable for the longest time, raking up 31b in losses, on the bet of capturing the market worldwide. scale here is different, but it's also 10 years later, with a lot more volatility and floating cash in the market (voo grew 327% over that period, not unreasonable that round size grew on the same trajectory)

Re: AI's Affordability Crisis

#73

Post by cmiles8 »

The math doesn’t add up and the wheels are starting to come off the bus.

The conversation in a lot of wealth management offices has shifted dramatically in the last few month from “how do I get in on this AI thing?” to “how do I protect my assets when this AI stuff blows up.”

There’s little question now if this will all implode, just when and who’s going to lose their shirt and be left without chairs when the music stops.

What’s playing out now is the scene from The Big Short where the banks wouldn’t mark down the value of bonds until they secured a short position. Once the big money has their helmets on it will stop providing fuel for the bubble and then look out below!

Re: AI's Affordability Crisis

#74

Post by jayd16 »

steveBK123 wrote: post #63
jayd16 wrote: post #58

Earlier quoted context omitted.

If folks won't pay a higher price, doesn't that mean it's inelastic?

Elastic demand means buyers are highly sensitive; a price hike causes a massive drop in purchases. Inelastic demand means buyers aren’t very sensitive; they keep buying regardless of price

Ah alright I have it backwards then.

Re: AI's Affordability Crisis

#75

Post by wongarsu »

steveBK123 wrote: post #16
knuckleheads wrote: post #11

Shouldn't we know a better answer to these questions once Anthropic's IPO materials surface publicly? I understand, and maybe even expect, SpaceX's materials to be all over the place and skate on by any discussion of unit economics, but the nerds over at Anthropic might just be forthright enough to just tell us what their margin is on tokens as part of their IPO.

Well it probably doesn't help that Dario is going around on podcasts saying things like "frontier labs need $1T of revenue or they will go bankrupt" lol.

Which is just a flashy way to say "we have low margins and lots of overhead".

Considering how much they spend on sales, marketing and R&D that doesn't sound that absurd

Re: AI's Affordability Crisis

#76

Post by unholiness »

jayd16 wrote: post #58
piker wrote: post #49

Earlier quoted context omitted.

I.e., the demand for programming tokens turns out to be quite elastic.

If folks won't pay a higher price, doesn't that mean it's inelastic?

"Elastic" in economics happens to refers to how elastic the supply/demand is when the price changes (not vice versa, as you're describing). So e.g. an inelastic demand means the quantity demanded changes very little when the price doubles.

Re: AI's Affordability Crisis

#77

Post by 8n4vidtmkvmk »

hackingonempty wrote: post #53
CuriouslyC wrote: post #36

Earlier quoted context omitted.

The US govt is going to ban foreign models and foreign providers, and frontier labs are still cooked, because US companies will RLwash Chinese models to try and get in on the captive market. The frontier labs have already lost the war for coding, their next play is custom models for specific domains... Anthropic Galen for biomedical research, Anthropic Locke for legal analysis, etc, and you won't see _ANY_ intermedia…

> The US govt is going to ban foreign models The people have a right to make and use whatever models they want, protected by the constitution. At a minimum, the models are described in research papers that are unquestionably protected speech. Skilled devs turn those into programs, also protected speech.

How could Trump ban tiktok then? And Fable for that matter.

Maybe you're somehow legally allowed to distribute and download the weights, but most of us can't run GLM 5.2 at home.

Re: AI's Affordability Crisis

#78

Post by holyknight »

Most of the "affordability" and "pricing" discussion is pointless because we don't have any real numbers on their margins per token. So, yes, they are subsidizing their subscription plans compared to the API prices, but the API prices could already be stupidly inflated, so the relative price comparison is a nothing burger. Until we know (or at least get a hint) on their margins on API prices, any pricing discussion is pointless.

Re: AI's Affordability Crisis

#80

Post by titzer »

The coming AI enshittification is going to be epic. For those of us who have been on the web for more than five minutes, we can see this a mile away.

If you think search ads are annoying, pre-roll YouTube ads are annoying, streaming ads are annoying, or basically ads-on-any-screen-anywhere-at-any-time are annoying, just wait until every stupid thing is powered by AI and is subtly trying to manipulate you to buy/watch/believe some crap all the time.

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