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AI's Affordability Crisis

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Re: AI's Affordability Crisis

#81

Post by jcgrillo »

onion2k wrote: post #60
fny wrote: post #34

The unit economics might be just fine. We'll know more after IPO. The drug dealer analogy has a darker side to it, however. Once your dependent, they can drive up the price just because . It doesn't need to be for existential reasons.

Once your dependent, they can drive up the price just because. It doesn't need to be for existential reasons. This is the crisis point for vibe-coders. A developer can go back to writing code by hand, as horrible as that might sound. Someone who hasn't learned to code but builds with AI can't go back. They either pay or they stop. That will be an painful choice whichever way you fall.

There's a secret third option: learn. At one point, all of us were "nontechnical", but we learned. The trick is to never stop.

Re: AI's Affordability Crisis

#82

Post by bayarearefugee »

827a wrote: post #71

> 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 va…

> it may underestimate the inference margins of Ant/OAI's API pricing.

If true then why are neither Anthropic or OpenAI dropping their API pricing to gain market share when both are clearly doing all sorts of political and PR maneuvering to compete in a cutthroat market?

Since they aren't dropping the API usage prices (and are in fact raising them in a lot of subtle ways) then one of these options almost has to be true: they are still subsidizing inference, training costs are so ridiculously high that they need to make huge profits off inference or collapse in on themselves, or they are price fixing.

Re: AI's Affordability Crisis

#83

Post by skeledrew »

mikgp wrote: post #19
simianwords wrote: post #4

This is basically bunk because AI costs have gone down by 50x or more (api costs) since 3 years.

This doesn’t solve the problem because (tautologically) the more AI prices go down the less money the companies make. If right now today the companies are operating at a profit and a price war causes the API costs to sink 90% next year, and their capex amortization costs stay fixed. The math doesn’t math.

AI prices going down means the models are improving, particularly from the efficiency angle (which is inevitable, given the nature of tech). That means all they have to do is maintain a large enough customer base at a rate high enough to ensure loss decreases continuously over time, until eventually the pass the point where they're just gaining. Healthy competition ensures that improvement savings are actually passed on to users in a measured manner, so they don't become too greedy in trying to get to and increase gains.

Re: AI's Affordability Crisis

#84

Post by jcgrillo »

cmiles8 wrote: post #73

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 s…

Assuming the analysis is right, and most (or all) of these AI companies will default on their debts, what consequences might that have?

Re: AI's Affordability Crisis

#85

Post by SpicyLemonZest »

rhinoceraptor wrote: post #62
tacone wrote: post #27

My take is that Anthropic and OpenAI simply are NOT competing on price. 2 big players are often not enough to create tension on price. Chinese models and open model providers are, indeed, competing on price, and the difference shows.

How are Anthropic and OpenAI going to compete on price when they're both already deeply unprofitable?

They may not be able to! It's pretty widely acknowledged, for example, that if there's some surprising plateau hiding around the corner they're both going to fail. But that could mean that they're overcharging for AI usage to get research money and sustainable rates are lower rather than higher.

Re: AI's Affordability Crisis

#86

Post by JimsonYang »

fny wrote: post #34

The unit economics might be just fine. We'll know more after IPO. The drug dealer analogy has a darker side to it, however. Once your dependent, they can drive up the price just because . It doesn't need to be for existential reasons.

The dependent idea is questionable- when your boss tells you to not use the most expesive models-you just dont

I would assume when price hikes happen either 1) less non technical people would vibecode as it doesnt impact the work that much 2) people use the cheaper chinese models 3)we're jamming ai into everything because were exploring. We will just niche down into use cases that provide high roi

Re: AI's Affordability Crisis

#87

Post by jcfrei »

onion2k wrote: post #60
fny wrote: post #34

The unit economics might be just fine. We'll know more after IPO. The drug dealer analogy has a darker side to it, however. Once your dependent, they can drive up the price just because . It doesn't need to be for existential reasons.

Once your dependent, they can drive up the price just because. It doesn't need to be for existential reasons. This is the crisis point for vibe-coders. A developer can go back to writing code by hand, as horrible as that might sound. Someone who hasn't learned to code but builds with AI can't go back. They either pay or they stop. That will be an painful choice whichever way you fall.

There are already open weight models out there that are capable and cheap enough for a lot of coding tasks. Not as good as Claude but not far from it. There's no going back to pre-AI coding.

Re: AI's Affordability Crisis

#88

Post by skywhopper »

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.

The US government isn’t supposed to be allowed to constrain speech, but they do have the power to constrain commerce, and they can ban the sale of AI services and AI-capable hardware if they choose.

Re: AI's Affordability Crisis

#90

Post by sdesol »

steveBK123 wrote: post #54
piker wrote: post #49

Earlier quoted context omitted.

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

I would imagine it only gets worse in the face of good-enough open/chinese/local models too right? Microsoft adding Deepseek support already as I recall? That is - for any definition of "they are behind X months" then eventually they get to the point Claude was in January when the world freaked out, but at 1/10th the cost. A lot of firms are going to mandate that is good enough for their developers.

> Microsoft adding Deepseek support

I believe this hasn't been confirmed yet but I think it speaks to a bigger problem for the AI companies which is, if you give capable developers a good reasoning LLM, they can make it work like it was a really expensive model.

I believe we are 100% at the stage of good enough for the vast majority of tech companines. Fable and others will be more valuable for non-traditional tech companies.

I read somewhere that the chinese AI companies are sharing knowledge and it would not surprise me if the government is applying pressure by saying work together or else. If they work together, they can truly commoditize LLMs and with China ramping up hardware support for AI, I see the future being inference speed and hardware being the moat.

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