They are currently selling it at a huge loss, agreed. They’ve got plenty of runway for specialised hardware prices to come down, for companies to get hooked and plugged into the ecosystem and for real value to be demonstrated.
When this happens they’ll raise prices and companies will gladly pay it.
Profit at this point is not relevant, seen from the perspective of investors.
That’s ’embrace, extend, extinguish’ for you. Question is if there is a profitable model to come. The usual economies of scale don’t seem capable of adding up in this case. Even the maniacs on Wall Street are balking.
That’s fair. I think they are trying to utilize EEE to replace search, content creation, and more - everything AI is being shoveled into. But the main goal is just to force utilization through any means necessary and establish a new market & sales model they are unable to define.
Certainly part of the sales pitch. But so far it turns out humans are more efficient (cost less). I think the appeal to companies is the control (and the cost while it’s so heavily subsidized by the industry pushing it). The appeal to the major AI investors and execs is to… privatize the profits and socialize the losses. They will golden parachute themselves and leave the people with their mess.
It could be, but it doesn’t look promising - and the fact that it’s pretty much impossible to know what the actual costs are is, in itself, very telling.
When you use these services, the company in question then pays for access to the AI models in question, either at a per-million-token rate to an AI lab, or (in the case of Anthropic and OpenAI) whatever cloud provider is renting them the GPUs to run the models. A token is basically ¾ of a word.
As a user, you do not experience token burn, just the process of inputs and outputs. AI labs obfuscate the cost of services by using “tokens” or “messages” or 5-hour-rate limits with percentage gauges, and you, as the user, do not really know how much any of it costs. On the back end, AI startups are annihilating cash, with up until recently Anthropic allowing you to burn upwards of $8 in compute for every dollar of your subscription. OpenAI allows you to do the same, though it’s hard to gauge by how much.
Some enterprises do run their own hardware (these can ROI in 6 months or so), and there the economics is very well known. For the majority of the current use it’s a giant bubble, as Ed Zitron’s great analyses keep telling us.
Except it’s not profitable at all. It’s a huge bubble waiting to collapse.
They are currently selling it at a huge loss, agreed. They’ve got plenty of runway for specialised hardware prices to come down, for companies to get hooked and plugged into the ecosystem and for real value to be demonstrated.
When this happens they’ll raise prices and companies will gladly pay it.
Profit at this point is not relevant, seen from the perspective of investors.
That’s ’embrace, extend, extinguish’ for you. Question is if there is a profitable model to come. The usual economies of scale don’t seem capable of adding up in this case. Even the maniacs on Wall Street are balking.
That’s not quite my understanding of EEE.
What the AI model owners are doing seems to me just to be normal loss-leading with a view to gain market share.
That’s fair. I think they are trying to utilize EEE to replace search, content creation, and more - everything AI is being shoveled into. But the main goal is just to force utilization through any means necessary and establish a new market & sales model they are unable to define.
Not yet, but wait until they’ve reduced their workforce by 75%, and they can save all those associated expenses.
It won’t work, of course, but they’ve deluded themselves into believing it.
Certainly part of the sales pitch. But so far it turns out humans are more efficient (cost less). I think the appeal to companies is the control (and the cost while it’s so heavily subsidized by the industry pushing it). The appeal to the major AI investors and execs is to… privatize the profits and socialize the losses. They will golden parachute themselves and leave the people with their mess.
This part. Rich people never stopped jerking off over the idea of owning slaves.
The vast majority of the costs are HW and infra
I think they’re hoping that reaches more of a steady state
With how quickly tech advances and hardware degrades under heavy use, they’re going to be pushing that rock up a hill for a good while lol
Oh, agreed. And other tech companies are 1000% counting on that being true.
It is very profitable in certain roles in the enterprise. This is orthogonal to it being a massive bubble, about to blow up.
https://www.wheresyoured.at/the-subprime-ai-crisis-is-here/
It could be, but it doesn’t look promising - and the fact that it’s pretty much impossible to know what the actual costs are is, in itself, very telling.
Some enterprises do run their own hardware (these can ROI in 6 months or so), and there the economics is very well known. For the majority of the current use it’s a giant bubble, as Ed Zitron’s great analyses keep telling us.