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Is AI Profitable Yet?

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Re: Is AI Profitable Yet?

#191

Post by rdl »

ch_fr wrote: post #184
rdl wrote: post #164

Earlier quoted context omitted.

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 The situation is either "your GPU AND the datacenter infrastructure it's running on is obsolete", or "Nvidia's profits tank because people are staying with current-level infrastructure".

That would be true if everyone weren't supply constrained and buying literally everything they can find.

There are actual risks that this trend doesn't continue, but as long as the trend continues, it is pretty good for revenue. "AI shown to hit a wall/doesn't actually deliver/stops growing so fast", "massive improvement in hw efficiency or tech such that all the old stuff becomes obsolete", "bottleneck on power/regulations/etc such that no one wants anything but the most efficient cutting edge stuff" would be the ways it could end and then all these factors reverse. Right now, power is so constrained that old, inefficient power generation is actively being turned back on or set up at new sites (e.g. old aviation turbines which are very inefficient compared to combined cycle).

Re: Is AI Profitable Yet?

#192

Post by sarchertech »

JimDabell wrote: post #189
sarchertech wrote: post #186

Earlier quoted context omitted.

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.

I don’t know enough to be certain either way. But I will say that I know that Amazon has operated certain product segments at a loss before. Whether that’s with direct price subsidies or credits is irrelevant in the face of a new product with hype unlike anything I’ve ever seen in over 20 years in the industry. It’s highly plausible in the face of this absolute mania and FOMO that Amazon is operating open source inference at a loss to gain market share. They might think that inference prices will drop in the future.

They might be panicking because they don’t have good models of their own. Or they might just be price matching other open source inference providers. They have cut prices to keep up with competition many times over the years.

Whether they are doing it or not, you don’t know they aren’t, and it’s plausible that they are. So the claim that starts with “we know that people are making a profit selling open source inference at X price therefore Y” is unfounded.

Re: Is AI Profitable Yet?

#193

Post by throwaway85825 »

OsrsNeedsf2P wrote: post #109
throwaway85825 wrote: post #90

Earlier quoted context omitted.

Isn't ad ranking just SORT price;

Assuming you're not trolling, there's a few other things to consider - 1/ User targeting is complex - you can charge more for ads if the users you're showing the ads to click 2/ Ads impact user retention - you need to balance making money and keeping users around 3/ AI generated ads - this is a pretty big thing now, where instead of bringing your own media, you just describe your target audience and the AI will A/B t…

I've heard of the ad auction and assumed the point of the auction was to maximize price.

As for integrity ad platforms don't have any. Most of the ads seem to be for scams. The first search result for OBS is usually malware. Scammers have a low cost to advertise because they use stolen credit cards. Advertisers don't mind because the charge back doesn't cost them, COGS is near 0.

Re: Is AI Profitable Yet?

#195

Post by 0xbadcafebee »

zozbot234 wrote: post #170
0xbadcafebee wrote: post #162

Earlier quoted context omitted.

The old model works at tens of millions, not hundreds of billions. All the private capital is pretty tapped out, and banks aren't loaning (thank god). So they don't have investor money to burn (and when they do, they immediately burn it on new datacenters, which usually take years to build and aren't a certainty). That's why they made equity deals with hardware companies... it was the only way they could "afford" har…

They just have to incrementally raise the price of inference tokens and limit subscriptions to curtail existing demand (with much of it likely moving to slower and cheaper local models). Which, come to think of it, is exactly what seems to be happening right now. > So they don't have investor money to burn (and when they do, they immediately burn it on new datacenters, which usually take years to build and aren't a c…

They would have to raise the price of inference (and not just inference but actual contracts) 4x, within a year or so, for PaaS not to run out of cash. But nobody wants to pay that much money, and there are a swath of companies all over the world who will do it for much, much less. People will stick with them out of irrational fears (fear of the unknown, fear of missing out) until it gets too painful. And when people start leaving, what then? Anthropic's hope is that they can make a moat so high everyone is trapped. But it's actually not hard to replace Claude with a competitor.

They can get more efficient, but inference efficiency doesn't map linearly to cost efficiency. Firstly because software is a gas; if you give people more compute (for the same price), they immediately use it all up. But second, if you spend $50BN, you still have to make $50BN to break even. They could make inference cost $0.00000001, but that isn't going to cover their costs. That's what's driving their cost right now - they're trying to collect enough cash from people at the table to pay the bill, without the price scaring everyone out of the restaurant.

So they can't raise the price without scaring people off, and they can't lower the price and pay the bill.

Re: Is AI Profitable Yet?

#196

Post by 0xbadcafebee »

PinkaDunka wrote: post #99

Oh wow, they already got 50% of investments back in roughly three years? This is going to be insane money making machine. Or is it not the point op was trying to make?

Keep in mind that some of the revenue booked is due to circular deals. AWS for example gives Anthropic "cpu credits" that Anthropic spends on AWS, and AWS books that as revenue. The reverse is true too: Anthropic gives AWS inference credits and Anthropic books that as revenue. When it's really just a pre-existing server sitting there and two companies claiming they made money off it. There are also equity deals going on the same way; they give each other stock, (or one gives the other stock in exchange for GPUs) and both benefit as the stocks get inflated despite there not really being more value.

Re: Is AI Profitable Yet?

#197

Post by agentpenguin »

zozbot234 wrote: post #170
0xbadcafebee wrote: post #162

Earlier quoted context omitted.

The old model works at tens of millions, not hundreds of billions. All the private capital is pretty tapped out, and banks aren't loaning (thank god). So they don't have investor money to burn (and when they do, they immediately burn it on new datacenters, which usually take years to build and aren't a certainty). That's why they made equity deals with hardware companies... it was the only way they could "afford" har…

They just have to incrementally raise the price of inference tokens and limit subscriptions to curtail existing demand (with much of it likely moving to slower and cheaper local models). Which, come to think of it, is exactly what seems to be happening right now. > So they don't have investor money to burn (and when they do, they immediately burn it on new datacenters, which usually take years to build and aren't a c…

The subscriptions will drop if they increase the price and if they don't increase the price, they will run out of cash to operate.

It's simply not feasible.

Re: Is AI Profitable Yet?

#198

Post by renticulous »

0xbadcafebee wrote: post #162
harrall wrote: post #134

Earlier quoted context omitted.

Household names like Uber, Amazon, Blue Bottle Coffee and Fedex used the same playbook of burning investors’ cash for years and look where they’re now. Everyone’s long term plan is hoping that they build out and survive long enough that, in the end, the market accepts them. Even your local still-unprofitable restaurant is burning their grandparents’ inheritance money hoping that it works out. But on the other hand, t…

The old model works at tens of millions, not hundreds of billions. All the private capital is pretty tapped out, and banks aren't loaning (thank god). So they don't have investor money to burn (and when they do, they immediately burn it on new datacenters, which usually take years to build and aren't a certainty). That's why they made equity deals with hardware companies... it was the only way they could "afford" har…

> The old model works at tens of millions, not hundreds of billions.

The first computers were the size of buildings, now look where we are. I think same thing will happen to AI models. We will have a reasoning core installed on our phone connected to Google's Knowledge Graph or Ontology project via API. These companies just need to survive long enough to make themselves irreplaceable in the new ecosystem.

Re: Is AI Profitable Yet?

#199

Post by zozbot234 »

0xbadcafebee wrote: post #195
zozbot234 wrote: post #170

Earlier quoted context omitted.

They just have to incrementally raise the price of inference tokens and limit subscriptions to curtail existing demand (with much of it likely moving to slower and cheaper local models). Which, come to think of it, is exactly what seems to be happening right now. > So they don't have investor money to burn (and when they do, they immediately burn it on new datacenters, which usually take years to build and aren't a c…

They would have to raise the price of inference (and not just inference but actual contracts) 4x, within a year or so, for PaaS not to run out of cash. But nobody wants to pay that much money, and there are a swath of companies all over the world who will do it for much, much less. People will stick with them out of irrational fears (fear of the unknown, fear of missing out) until it gets too painful. And when people…

> But nobody wants to pay that much money

People will want to pay that much once they're enabled to make the best and most efficient use of SOTA proprietary models for tasks that actually benefit from them, while using cheap third-party inference everywhere else. That's very different from what the leading AI firms are proposing right now and it does require some careful balance to get there from here, but it's absolutely doable.

Re: Is AI Profitable Yet?

#200

Post by culi »

crystal_revenge wrote: post #29

It’s weird to me that people here suddenly seem to care about profitability for relatively early stage companies just because they’re “AI”. I know a traditional SaaS company I worked for that IPO’d years ago and still has no signs that they can be profitable (and many others like it) and nobody seems particularly concerned.

As of Feb 2026, $1.6 trillion had been spent on AI infrastructure. In 2024 dollars, we spent $36 billion on the Manhattan Project, $150 billion on the ISS, and $620b on the entire US interstate highway system.

In 10 years, we've spent nearly 3x the cost of the entire US interstate highway system on AI.

Some helpful visualizations: https://www.aljazeera.com/news/2026/2/19/visualising-ai-spen...

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