[niobe]

This is clearly a well-timed loss-leading strategic market share grab! Anthropic have blown a lot of user trust in the last couple of months..

But, overall, the current AI pricing is completely unsustainable, across all AI companies, except via the exponential growth they are relying on. Dylan Patel did the most insightful analysis of this I've come across.. https://youtu.be/mDG_Hx3BSUE?si=nyJu4adwYCH1igbJ

[sidrag22]

Really feel like the current versions are for sure "good enough". Thats not how market capture is gonna function though and they are gonna keep pushing because the only moat is to stay ahead, so the problems gonna stay strange. at some point more compute isn't a reasonable answer, and optimization is, and my feeling is we are well past that point from a product perspective, but ipos etc etc

[2ndorderthought]

The only moat is the us trying to buy all the compute hardware in the world for the next two years. Then China, amd, etc are just making their own chips.

[Bromeo]

DeepSeek claims that they can run inference on Huawei chips. Not sure about training.

[2ndorderthought]

If not now then definitely soon enough

[niobe]

So I think the current generation of models are arguably all about the same in terms of capability. However, the requirement for exponential growth I mentioned is all about the economics.

AI companies are trying to ride a growth wave where the income curve lags the expense curve by 1-2 years, and at the same time investing 10x their historical income on next year's projected demand.

Everyone is selling their API calls at a loss, because to capture the investment required to scale the business up and the costs down, you need to grow your market now (in relative and absolute terms). And history shows, that in big tech you often have winner-takes-all situations, or, at least a couple of big firms will dominate, and the others will die. That's where market share becomes a key strategic goal.

But to secure that, they also need to be building next year's compute now. And if their anticipated compute needs are 10x this year, they've got a serious funding problem, one that can only be filled by capital with an appropriate risk appetite. You can only get this high-risk capital when the potential payoff is even more enormous, or, when it's a smaller bite of a much bigger pie. Hence, MS putting into OpenAI and so on. But the investment needs are getting so big we are starting to see some pullback from more conservative sources, but also record deals from others.

Now say an AI company does get the capital they need to grow. Well, they've still got a very serious supply problem. RAM, GPUs, water, electricity etc. Hence why there's a lot of deals and cross-investment going on - everyone is trying to secure resources and lower their overall risk exposure while keeping a foot in every possible door, so they can switch alliances whenever it's expedient, and because collaboration also helps the overall market to grow.

This all explains to me why the industry _needs_ the hype. These companies can't exist without it, because the money they need to sink in, in order to even be around in 18 months, far outstrips all reasonable financial practices. So it's capitalism on steroids or nothing. If you believe the AI story, then to that extent, it's rational.

But note that nowhere in this scenario does it suggest the actual consumers will be getting a consistent product at a consistent price!!!