[adventured]

Grok is losing pretty spectacularly on the user / subscriber side of things.

They have no path to paying for their existence unless they drastically increase usage. There aren't going to be very many big winners in this segment and xAI's expenses are really really big.

[EdwardDiego]

I really wonder what will happen when the AI companies can no longer set fire to piles of investor money, and have to transition to profitability or at least revenue neutrality - as that would entail dramatically increasing prices.

Is the plan to have everyone so hopelessly dependent on their product that they grit their teeth and keep on paying?

[o333]

The answer to this is very very simple.

Think about the stock return over a period - its composed of capital gains and dividends.

Now what happens capital gains disappears and perhaps turns into capital losses? Dividends have to go higher.

What does this mean? Less retained earnings / cashflows that can be re-invested.

Apple is the only one that will come out of this OK. The others will be destroyed for if they dont return cash, the cash balance will be discounted leading to a further reduction in the value of equity. The same thing that happened to Zuckerberg and Meta with the Metaverse fiasco.

Firms in the private sphere will go bust/acquired.

[JumpCrisscross]

> Now what happens capital gains disappears and perhaps turns into capital losses? Dividends have to go higher

This is not how corporate finance works. Capital gains and losses apply to assets. And only the most disciplined companies boost dividends in the face of decline—most double down and try to spend their way back to greatness.

[adventured]

It'll be a combination of advertising and subscription fees, and there will only be a few big winners.

Gemini is practically guaranteed. With the ad model already primed, their financial resources, their traffic to endlessly promote Gemini (ala Chrome), their R&D capabilities around AI, their own chips, crazy access to training data, and so on - they'd have to pull the ultimate goof to mess up here.

Microsoft is toast, short of a miracle. I'd bet against Office and Windows here. As Office goes down, it's going to take Windows down with it. The great Office moat is about to end. The company struggles, the stock struggles, Azure gets spun off (unlock value, institutional pressure), Office + Windows get spun off - the company splits into pieces. The LLMs are an inflection point for Office and Microsoft is super at risk, backwards regarding AI and they're slow. The OpenAI pursuit as it was done, was a gigantic mistake for Microsoft - one of the dumbest strategies in the history of tech, it left them with their pants down. Altman may have killed a king by getting him to be complacent.

Grok is very unlikely to make it (as is). The merger with SpaceX guarantees its death as a competitor to GPT/Gemini/Claude, it's over. Maybe they'll turn Grok into something useful to SpaceX. More likely they'll slip behind and it'll die rapidly like Llama. The merger is because they see the writing on the wall, this is a bailout to the investors (not named Elon) of xAI, as the forced Twitter rollup was a bailout for the investors of Twitter.

Claude is in a weird spot. What they have is not worth $300-$500 billion. Can they figure out how to build a lot more value out of what they have today (and get their finances sustainable), before the clock runs out? Or do they get purchased by Meta, Microsoft, etc.

OpenAI has to rapidly roll out the advertising model and get the burn rate down to meaningless levels, so they're no longer dependent on capital markets for financing (that party is going to end suddenly).

Meta is permanently on the outside looking in. They will never field an in-house competitor to GPT or Gemini that can persistently keep up. Meta doesn't know what it is or why it should be trying to compete with GPT/Gemini/Claude. Their failure (at this) is already guaranteed. They should just acquire GPT 4o and let their aging userbase on FB endlessly talk itself into the grave for the next 30 years while clicking ads.

If Amazon knew what they were doing (they don't right now), they would: immediately split retail + ads and AWS. The ad business ensures that the retail business will continue to thrive and would be highly lucrative. Then have AWS purchase Anthropic when valuations drop, bolt it on to AWS everything. Far less of an anti-trust issue than if what is presently known as Amazon attempted it here and now. Anthropic needs to build a lot on to itself to sustain itself and justify its valuation, AWS already has the answer to that.

If valuations plunge, and OpenAI is not yet sustainable, Microsoft should split itself into pieces and have the Windows-Office division purchase OpenAI as their AI option. It'd be their only path to avoiding anti-trust blocking that acquisition. As is Microsoft would not be allowed to buy OpenAI. Alternatively Microsoft can take a shot at acquiring Anthropic at some point - this seems likely given the internal usage going on at Redmond, the primary question is anti-trust (but in this case, Anthropic is viewed as the #3, so Microsoft would argue it bolsters competition with GPT & Gemini).

[o333]

"Gemini is practically guaranteed. With the ad model already primed, their financial resources, their traffic to endlessly promote Gemini (ala Chrome), their R&D capabilities around AI, their own chips, crazy access to training data, and so on - they'd have to pull the ultimate goof to mess up here"

Im not convinced on this TBH in the long-run. Google is seemingly a pure play technology firm that has to make products for the sake of it, else the technology is not accessible/usable. Does that mean they are at their core a product firm? Nah. Thats always been Apple's core thing, along side superior marketing.

One only has to compare Google's marketing of the Pixel phone to Apple - it does not come close. Nobody connects with Google's ads, the way they do with Apple. Google has a mountain to climb and has to compensate the user tremendously for switching.

Apple will watch the developments keenly and figure out where they can take advantage of the investments others have made. Hence the partnerships et al with Google.

[arppacket]

*Altman may have killed a king by getting him to be complacent.*

I still think a lot about the failed OpenAI coup, and how different things would be now if Microsoft hadn't backed Altman. Would this hype cycle and bubble grown so ridiculous if there were more conscientious people in charge at the front-runner? We will unfortunately never know. I really wish that board had planned out their coup better.

[postexitus]

Why do you say Amazon doesn't know what they are doing? I think among those mentioned, they are the best positioned alongside Apple in the grander schema of things.

Also you say meta will never field a competitor to GPT - but they did llama; not as a commercial product, but probably an attempt at it (and failed). Otherwise agreed.

[TurdF3rguson]

Merging with SpaceX means they don't have to pay for their existence. Anyway they're probably positioned better than any other AI player except maybe Gemini.

[ericmay]

I don’t follow why merging with SpaceX means they don’t have to pay for their existence. Someone does. Presumably now that is SpaceX. What is SpaceX’s revenue?

[reverius42]

Maybe the idea is that SpaceX has access to effectively unlimited money through the US Government, either via ongoing lucrative contracts, or likely bailouts if needed. The US Govt wouldn't bail out xAI but they would bail out SpaceX if they are in financial trouble.

[arppacket]

Bingo! Elon's main life mission now is to roll back social progress via the anti-woke combination of xAI and Twitter. That's why he's tying them to the now rather-essential SpaceX, despite possibly hurting its IPO. He can now keep pumping money into them without a worry.