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Who's afraid of Chinese models?

stratechery.com

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Re: Who's afraid of Chinese models?

#411

Earlier quoted context omitted.

For personal use I agree. For companies, these decisions are very sticky. Companies go through a lot of red tape to get anything purchased and approved, then they discourage change because it's a lot of work. So the product that gets a foothold in a company sticks for a long time. Then a couple years later a sales person convinces an exec that they can save some money by switching, so the switching game begins. Not n…

I'm confused, I work at a big giant Fortune 500, we all get GitHub Copilot subscriptionsn - we can switch between OpenAI and Anthropic models with just a click in Visual Studio. There's no stickiness at all. They just made us go through a training after the price hikes about how to choose between models for the best cost/benefit ratio.

GitHub Copilot and Visual Studio are the sticky products for your company.

Re: Who's afraid of Chinese models?

#412
I think releasing models for free is some 4d chess move by the chinese. Big chunk of the us stock market is fueled by ai mania, if the frontier labs turn out to be drastically less valuable than first believed, the downturm may be very bad. Think of all the big tech companies that have a ton of debt that they took to pour money into AI. It seems like a similar tactic to what Chinese car manufacturers are doing in Europe but the result may be more dramatic.

Re: Who's afraid of Chinese models?

#413

I operate an analytics site (pretty big one B2B where client's backend feeds data into our system), and we see tons of traffic originating from northwestern China (Xinjiang) from Shenzhen Tencent Computer Systems Company Limited. There are also half a dozen other companies from China continuously hammering our clients’ websites. I was wondering, what's in that cold dessert? Low and behold satellite imaging shows mass…

What does this line mean “ the web at a rapid rate and build corpora.” , what are they trying to do? Suck up data for training AI or something else?

Re: Who's afraid of Chinese models?

#414

I operate an analytics site (pretty big one B2B where client's backend feeds data into our system), and we see tons of traffic originating from northwestern China (Xinjiang) from Shenzhen Tencent Computer Systems Company Limited. There are also half a dozen other companies from China continuously hammering our clients’ websites. I was wondering, what's in that cold dessert? Low and behold satellite imaging shows mass…

I thought you got the location from BGP registration, then IMHO the before/after are both correct, it might be datacenter in Xinjiang belongs to Tencent.

Re: Who's afraid of Chinese models?

#415

I operate an analytics site (pretty big one B2B where client's backend feeds data into our system), and we see tons of traffic originating from northwestern China (Xinjiang) from Shenzhen Tencent Computer Systems Company Limited. There are also half a dozen other companies from China continuously hammering our clients’ websites. I was wondering, what's in that cold dessert? Low and behold satellite imaging shows mass…

And, non-state run Chinese companies are just like companies in US, they usually don't joint forces to maintain a common infrastructure, if they can build moat (or at least be in leading position for a period of time), they do it, sharing crawl dataset is no go.

Re: Who's afraid of Chinese models?

#416
post #305

Earlier quoted context omitted.

The (quite excellent) article discusses several of your points. If you haven't read it, I recommend it. - Commodity market profitability is determined by marginal cost of production. LLMs have marginal cost; traditional software does not. - Models are not free. Downloading them is free. Running them is not. This has manufacturing economics, not software economics; the idea that they are "free" is an economic category…

Yea but at those rates VCs will never make their money back. Because Deepseek and friends keep releasing the inference optimisations to everyone instead of holding them back to pay their investors.

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Re: Who's afraid of Chinese models?

#417

The people who are most afraid of Chinese models are the VCs who poured into Anthropic and OpenAI at astronomically high valuations. Anthropic is valued at $1.2T and OpenAI is targeting $850B. These astronomical valuations were built on the premise that these labs would generate massive profits from premium API pricing, but the Chinese labs are completely undercutting this strategy by releasing excellent open models…

I don't think it's that black and white. OpenAI and Anthropic are building valuable tools on top of their models. You get a very rough and much less polished version of that with open source tools and and open source models. And you still need inference infrastructure to run those. But at this point most of the competition is in the tool ecosystem, not the models. And while there are plenty of people toying with things like opencode there's a clear pecking order emerging where Codex and Claude Code/Cowork are generally considered the top choices before tools like MS Copilot, Gemini, and then a rapidly shrinking long tail of alternatives to those.

In the end what companies pay for is not tokens but results. A DIY kit of models, mac minis or whatever, and a bunch of poorly integrated OSS tools doesn't solve their problem. For the same reason, people use Office 365 rather than running Libreoffice. And for the same reason things like AWS dominate the market rather than people DIYing their infrastructure together themselves. Most of the money is in polished turn key solutions. Which is what Anthropic and OpenAI offer.

The juicy market here is the enterprise market. That's mostly business users, not programmers. They'll be hooking up all their SAAS tools (which they also over pay for), and other stuff. They'll be paying for boring things like data residency, compliance, etc. And they need access to reliable infrastructure to run all this stuff. They'll want this shit to just work and not to be dealing with a lot of poorly integrated stuff.

Most of the billions invested are being sunk into infrastructure, chip design, and access to resources (land, water, energy) needed to run data centers. A handful of companies now own most of that infrastructure and they also happen to have the top models, researchers, the best tools, and warm customer relations. And they sell access via very convenient subscriptions with high enough limits that people don't have to worry about things like token cost. The game here is recurring revenue from customers that like predictable pricing, reliable quality of service, and iron clad compliance and data security & residency, and quality guarantees. These companies don't want to be chasing model quality and have to upgrade their entire company every few weeks. They want continuity and predictability. Mostly they just pay Anthropic, OpenAI, MS, or Google to take care of this for them. There might be some niche EU players that become a bit bigger. But I don't see a large scale switching to Chinese suppliers for a full polished alternative. The Chinese might give away their models. But I don't think they'll be generating a lot of revenue.

And if you want to run your own models, you'll still need infrastructure to run it. These four companies together with the usual cloud giants control most of that and as well of the supply of resources (chips, data centers, energy, etc.) in the EU and US markets. There's going to be a long tail of self hosted and gobbled together stuff but it's going to be a much rougher experience for end users and it won't likely be most of the market any time soon.

Re: Who's afraid of Chinese models?

#418
I loved this article! Regardless of how you feel about AI as an industry or tool, the economics of AI is fascinating. It's awesome to see something like this that gets into the business side a bit more.

I don't know if I agreed totally with the assessment of the risk Chinese labs pose to US labs though, in particular I think the main part I wasn't sure about was this:

> I highly doubt that Chinese models are cheaper to serve on a marginal cost basis, they just seem cheaper because Anthropic and OpenAI are so supply constrained that they are charging far more than they would if there were sufficient supply to meet the demand for intelligence.

How true is this? My understanding from Deepseek's original paper was that they focused heavily on optimising training and inference costs, in particular so that they can operate on cheaper (and more accessible to China) hardware.

It's possible I'm just not in the loop, but nobody seems to talk about US models innovating in this way (I'm just talking about cost-to-serve/train, not saying US AI companies don't innovate in other ways).

It seems to me at least, like there's a fair bit of evidence that AI shifting to a price based commodity market (vs a "best-model takes all" type market) would put China at a significant advantage? And even more significantly, require a pretty hefty correction of company valuations in the US?

Re: Who's afraid of Chinese models?

#419
post #389
post #331

Earlier quoted context omitted.

I have a couple questions. 1/ I don't see in the responses where the model says it is or isn't a genocide. Can you share the snippet from each, I included the logs above? 2/ I can't find a source on the UN ruling that you mentioned. I am not interested in the findings of an investigative body, just the official UN ruling. Can you share? ChatGPT (and myself) can only find this [0], which is a second round of written s…

Here: https://www.un.org/unispal/document/report-of-coi-14aug25/ It goes into depth about the purposeful destruction of civilian infrastructure including hospitals and educational facilities, force displacements, funding for new settlements in the land of displaced people, judaization and segregation, and more. > The Commission analysed the military operations of the Israeli security forces in Gaza from October 2023…

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Re: Who's afraid of Chinese models?

#420

Earlier quoted context omitted.

I think the point here is that it takes the same hardware to inference an open source model as OpenAI/Anthropic inference their models. IE, a lower param OpenAI/Anthropic model can compete with a higher param open source model. So even if you are an American company who downloaded Chinese models in hopes of saving in cost, you still have to beat OpenAI and Anthropic in $/task which is very tough to do over the long r…

The problem is these AI companies are running at a loss with the hopes of pumping the prices after everyone is hooked. Now they are locked in at selling API access at rock bottom price. The valuations won't hold.

It’s even worse. There operating costs are rising because of their own demand claims while those same rock bottom api prices are locked in.

There being squeezed by their own stock pumping and SpaceX pretending to be an AI company is driving down the exit strategy. I’m guessing one starts going full Theranos and begins claiming full AGI or gets the US government to government cheese then hard. It’s going to be a few crazy months.

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