[crystal_revenge]

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.

[xbmcuser]

These companies are spending more money than budgets of many countries enough to add 2+% to the US GDP so the amount of loss for if it comes all crashing down will be huge.

[fsckboy]

if these companies go bankrupt, they will have spent (not lost) all their money, the large amounts of money that they got from investors. That money generated profits for other companies they bought stuff from, and income for their employees, and capital gains for other people if AIco acquired other companies.

the market cap of a company is computed by the current price of a company's shares, the last price paid; not all the shares of the company were bought at that price, the ones who got shares cheaper are showing paper profits, unrealized. Those who have already cashed out have money in their bank accounts that was transferred from people who wanted to get in. If the company goes bankrupt, their shares will be worthless, but the money they paid for them still remains in the accounts of people who sold their shares: the money was not lost even if some people lost money.

I'm not going to keep going through it but the reason it works to value things the way we do is that the values are comparable and they frequently work out, so snapshots of the economy and the participants are comparable. But "losses" are not like taking gold and feeding it into some deep fold in the earth where it will disappear into the molten middle of earth.

Stock valuations are "expectations for the future". Those expectations weren't money, they were lottery tickes where the lottery consisted of human creativity and human effort. People buying and selling share are moving real money around to trade the expectations. The money didn't go anywhere, it's still there, it's just that expectations for the future have been reduced. It all boils down to humans trading some of their time and potential on a bet that things work out. Some people's effort gets more rewarded than others. Not every team wins the world cup, but people like to play and like to watch.

[Retric]

That’s an overly simplified model. AI companies spending results in infrastructure beyond the company such as manufacturing capacity, power lines, software systems, and even individual expertise.

If they fail then the negative impact ripples through the economy due to misallocation of resources.

[fsckboy]

>infrastructure beyond the company

consider all the companies in a market and those that feed that market to be one virtual mega company, add up all the valuations and revenue streams, costs, etc and aggregate all the investors into one. Nothing changes about the picture I drew. We simplify models to make the real world understandable.

>negative impact ripples through the economy due to misallocation of resources

free or relatively free financial markets are the only way, the best way, the ne plus ultra of ways we know to allocate capital, we have no better way than for the owner of the capital and the reapers of the loss or reward to make a considered opinion that is risk "impedance" matched. By definition, the market does not "misallocate" capital, it optimally allocates it.

your theory is that we could somehow know the future, but that's a fallacy.

[Retric]

> one virtual mega company

Free market efficiency is inherently tied to having multiple companies. Treating the entire economy as a single company gives nonsensical results because it fundamentally differs from what actually occurs. You might as well compare the economy to a game of tick tack toe, inherent complexity isn’t something you can simplify it has meaningful consequences.

Your ideas like many other ideas are simply wrong.

> could somehow know the future

Perfect accuracy isn’t the only possibility here, there’s levels of error.

Our system involves intermediaries between the actual owners of capital and the allocation of that capital who have very different incentives. When the worst possibility is missing a bonus there’s little difference between losing 10% of an investors money and 100%. That results in inefficiency through the misalignment of incentives.

That is actually true, and thus there’s no way to gloss over that truth without simply being wrong.

[fsckboy]

>Treating the entire economy as a single company gives nonsensical results

trust me bub, I've studied much more econ than you. If a competitive market sets the prices (check, that's what is happening), and you want to analyze statistics of a sector (check, that's what we are doing), you can take those competitive prices as "given" and hold them constant, and consolidate the assets of in industry into one virtual entity. No claims were being made about competition, the claim is that "it is validate to consolidate statistic of what you are trying to study.

"how much did the AI sector make last year? how much will it make next year?" is not answered by running a simulation of competitive marketplace with production functions.

>>could somehow know the future

>Perfect accuracy isn’t the only possibility here, there’s levels of error.

if you deviate from the market's prediction of the future, you are increasing your levels of error; why do that?

[dwb]

Keep peddling that capitalist realism. “There is no alternative!” The market may not misallocate capital, by definition, but it very clearly and routinely misallocates resources. Let me guess: you’re doing relatively well for yourself?

[fsckboy]

>Let me guess: you’re doing relatively well for yourself?

Let me guess, you sit down next to Kobe Bryant and start by saying you're going to tell him about winning basketball?

[idiotsecant]

This is way, way more neat and tidy than reality. When these stocks start to sink there is going to be an enormous evaporation of value from the overall market because people in riskier investments will get scared that other people will get scared. This will scare people with slightly safer investments, on up the line. Capital will dry up and velocity of money will drop. The market is not made by rational robots, it's run by barely sentient apes just minutes from reverting to crushing things with rocks. The markets run on vibes and fever dreams of hitting the next big thing.

[conradkay]

That's one way to look at it, though it feels like you could say the same about the dot-com crash or 2008 which isn't too helpful. At the very least (extremely high-paying) jobs can be actually lost

[YetAnotherNick]

Loss to who? Now all of a sudden, we are caring about investors and sovereign funds?

And I think we passed the threshold for crash down for AI, even if AI companies wont be that profitable. Nvidia/cloud providers will be profitable as long as there is demand for AI.

[dhosek]

Their loss, big deal. Let them suffer. The problem is that when they crash they bring a lot of other stuff down along with them. The people who lost money in the 2008 crash were not the ones who suffered the aftermath.

[YetAnotherNick]

Because in 2008 ordinary everyday people invested in overvalued things like house.

[dhosek]

It went beyond that. I didn’t own a house, but my employer, facing an economic downturn, laid off about half its employees.

[YetAnotherNick]

Because house is part of economy. Crypto went from $4T market cap to $2T and no wide impact was observed. Same will be true for $4T AI market cap.

[Mistletoe]

Almost every single person’s retirement has exposure to this unless they have some sort of Bitcoin/gold/small cap value type portfolio.

[rsoto2]

Uhh I think a lot of people and their families likely have investment exposure to nvidia/hyperscalers. if places like Amazon spent unrealistically on ai or their stock goes down massively that could mean major job losses too.

If AI companies aren't that profitable...then they're going to stop spending so much money on GPUs to train AI models. A gigantic amount of Nvidia's profits would go bust overnight.

[YetAnotherNick]

But inference is increasing dramatically. Google says they now do inference of 3.2 quadrillion tokens per month, 7x increase in a year.

Claude code and others are here to grow even if they don't do any further training.

[rsoto2]

.. so what?

The cost(and size) to train models is also increasing and is still 60% of the cards that Nvidia is selling. Losing 60% of your most profitable revenue stream I think would do bad for a company regardless of how much inference is increasing "dramatically"(all this means is the GPUs are dead sooner and the cost to do this massive inference increases too)

[mgh2]

The strategy of "scale for long term market dominance" or the idea of "build it and they will come" [1] were premised on the notion that adoption will be organic.

AI usage seems to have plateaued overall [2], except for niche use cases like coding, that is why companies are forcing it on their employees to justify ROI [3] or creating "products" w/ AI features [4] or embedded addiction.

[1] https://news.ycombinator.com/item?id=48241012

[2] https://news.ycombinator.com/item?id=48179021

[3] https://news.ycombinator.com/item?id=48148337

[4] https://news.ycombinator.com/item?id=48168626

[mgh2]

[1a] https://youtu.be/WoWP6YmFJaw?si=0QelV60rCDnDryxx&t=573

[dcre]

I don’t think “Usage has plateaued except for coding” is compatible with lab ARR at $80B and still growing exponentially.

https://www.theinformation.com/articles/anthropic-openais-sh...

[altcognito]

> AI usage seems to have plateaued overall, except for niche use cases like coding,

I sure hope more people think like this, because it's going to leave a lot of money on the table (for me)

[altmanaltman]

How? Like if AI usage skyrockets, I am sure the money on the table will be gobbled up by multi billion dollar companies before you, i would assume?

And if they are right then what? You won't get a lot of money?

Seems like a weird mix of inflated ego and lack of business understanding by you on this comment.

[scotty79]

Most business is finding the river of money, attaching yourself to it skilfully and sucking a small fraction for yourself.

[Imustaskforhelp]

(I don't quite understand your take?) but overall, companies like cloudflare are basically firing people for the costs associated with AI and layoffs are starting to being questioned with this take.

I don't know what your statement is but if you are an employee, then as your employer is forcing you to tokenmax and forcing you to use slop and creating leaderboards for these token spend which will all end up forcing the company to bleed money afterwards they might even lay off people.

If you are an employer then there are still long term issues associated. For example, cloudflare is a company which hasn't been in profit but it has burnt through 5 million dollars per month for AI as it first created an incentive (shrewd even) for employees to use it (for everything) only to please the investors but in the end, its still unclear how profitable all of it is for cloudflare.

Perhaps I have misunderstood you but I really don't understand how its going to leave a lot of money on the table, the only thing I see is a race to the bottom.

[sigmar]

Plateaued? Lol. Based on what? Pg 18 and 45 on that link are not showing a plateau.

[Aurornis]

We go through this with every startup cycle. Startups are not expected to be profitable because they’re spending so much money on growth and R&D. The concept of running a business in an intentionally unprofitable state is confusing to those who don’t understand startup funding.

The weird thing is that so many people believe that inference is unprofitable. There are large open weights models that companies run at a profit while charging far less than what OpenAI and Anthropic charge. Deepseek V4 just made their 75% off deal permanent and it was already very cheap.

Yes, you have to consider costs of training the models, but as usage grows it’s going to become a smaller and smaller part of the business.

I think we will see some data center businesses and AI companies blow up, but I think the people expecting the entire AI scene to blow up because prices quadruple are going to be disappointed.

[Frannky]

I wonder how much of this reasoning will make sense in the future. How much of the way you are thinking is based on the past curves reality worked before? Are you taking into account exponential acceleration? I guess abundance will flow in such a way that the idea of debt will be a thing of the past.

[sarchertech]

> There are large open weights models that companies run at a profit while charging far less than what OpenAI and Anthropic charge.

You have no idea whether those companies are making a profit.

1. All it takes is one of them operating a loss to gain market share to force the other ones to lower prices to compete.

2. There’s not reason to expect that these relatively small companies are correctly pricing GPU depreciation.

[Aurornis]

> You have no idea whether those companies are making a profit.

I doubt the various providers on OpenRouter are benevolently operating at a loss because they’re so generous.

You can also calculate the cost to run these models yourself. They are open weight and the hardware required to run them is not a secret. They can be modeled and many have done the business modeling.

I’m always surprised at how many Hacker News commenters are unaware that a lot of financial modeling and analysis has been done on these companies and models. It’s naive to think the the hottest topic in tech has not already been dissected and analyzed by the finance industry at every level.

[sarchertech]

Selling a brands new project at a loss to gain market share or to compete with other companies doing it because you hope you can outlast them isn’t being benevolent or generous.

If you want to link to a specific cost analysis that was performed by someone without a vested interest in generating hype then do it and we’ll discuss that.

Because what you wrote sounds an awful lot like “let me tell you a lot of very smart people are saying it.”

[zozbot234]

GPU depreciation cycles are slowing down a lot. A big chunk of frontier model inference is still being run on Hopper-era GPUs because anything more recent is heavily bottlenecked and it makes more sense to use the newer stuff for training,

[JimDabell]

When I go to Amazon and pay them for DeepSeek inference, do you think that Amazon are subsidising that?

[sarchertech]

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.

[JimDabell]

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.

[sarchertech]

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.

[vips7L]

You have to be naive to believe that any pricing is permanent.

[DrewADesign]

These companies are blowing through an incomparable amount of resources. If their bravado is misplaced, the economic impacts will be far more significant.

[choilive]

How so? Most of these companies will take a hit but will be fine Alphabet, Amazon, Google, etc can write off their entire investments in AI and will be a-OK. The pure AI companies will obviously be dead.

[droidjj]

This is what people said about the banks in 2007. Just because the big players’ balance sheets can take the hit doesn’t mean the wider economy is insulated.

[unsungNovelty]

Exactly. The below reply to you also says the banks were bailed out. "So people were right".

How so? Big corps got home safe. Not the people. People committed suicides and lost their livelyhoods.

[fooker]

And all these banks were bailed out by big brother. So the people were right.

[DrewADesign]

A) they still screwed the economy and everyone in it except themselves. B) Nobody gives a shit about the banks as businesses. They got bailed out because they physically made much of the world’s economy function, like plumbing. That’s not going to happen here.

[Zetaphor]

You're still ignoring their mention of the wider economy. The banks were bailed out, but everyone downstream of them still felt the brunt of the impact, atop paying for that bailout with tax dollars.

[dwb]

Yeah and a lot of far less powerful people got fucked over from the crash. Is that what a successful, functioning economy looks like to you?

[etempleton]

All of those companies will be fine, but they are currently valued on the stock market for future earnings. Investors anticipate them making a lot more money in the future. So stocks will slide dramatically. Open AI and Anthropic might not survive. And suddenly you see a 20-50% pull back on stocks. That impacts retirement and pension funds. It may trigger a panic and sell off across sectors.

[lenkite]

Hah, none of the big companies are going to write off their entire investment. They will come begging for bailouts.

Privatize Profits and Socialize Losses is now Bog-Standard Operating Procedure.

[DrewADesign]

https://fortune.com/2026/05/18/is-ai-a-bubble-1997-or-1999-w...

The stock market. Stocks crash, companies go belly-up, tons of people get laid off, unemployment spikes, people die. I don’t give a shit about the companies themselves. I do give a shit about who they employ, both directly and downstream, and the job market that will result from many of them losing their jobs.

[culi]

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...

[shimman]

Well seeing how they've all collectively spent over a trillion dollars and American citizens still don't have medicare for all, universal childcare, free school lunch, a publics job program, or universal education; it's quite easy to see why the American public has soundly rejected this technology where some are even trying to inflict violence to stop it.

[truncate]

dot-com bubble? It's less about black or white, and more about how much of it. Nothing weird to me about caring given how it all also impacts peoples lives and much wilder all these numbers are becoming.

[SXX]

Difference is that Amazon, Microsoft, Google or Oracle are not going out of business if it all collapses. Neither chip or hardware manufacturers will be harmed.

[wmf]

Oracle is on the edge; if they can't put their capex in SPVs they would get taken out by a crash.

[SXX]

I'm in no way expert on corporate finance, but Oracle has always been known to be sleaziest of sleazy companies. And Larry Ellison is still 6th richest person in the world and is not known to throw money on crazy moonshots like Mark Zuckerberg.

Oracle likely structured everything the way that its gonna be everyone else problem before they go down. No?

[loeg]

Oracle is a tiny fraction of the stock market.

[truncate]

What are you saying then? Don't question or point out things that seem weird? Drink the kool-aid?

[SXX]

This is just not dot com bubble. Its not like someone built x20 datacenter capacity than humanity needs or x10 chip manufacturing capacity or x5 power grid output.

So far capacity barely grown because its super slow to build, but prices skyrocketed x5 to x100.

If its blownup everyone will just return to selling hardware or capacity at 20% margin instead of 2000%.

Only major labs will collapse because they have nothing but models and losses. People working for them still gonna find a job just with $10,000 bunus instead of $1,000,000.

[squibonpig]

The economy is currently kinda riding on them.

[etempleton]

The difference is the sheer scale of the spend. I bet that SaaS company hasn’t spent the annual GDP of a small nation. If Chat GPT can’t pay the bills it is going to ripple through the economy likely causing at minimum a large correction. If the SAAS company goes under hardly anyone noticed.

[dnnddidiej]

SaaS or web in general was disrupting X making it eventually the leader with some moat. I am not so sure about AI. I feel like there is a rush to make a commodity that will be nebulous to extract value from. Except for TMSC and NVidia.

[dev1ycan]

Maybe because losing 700b so far is not "safe" for the economy?

[guidedlight]

The US “loses” $1T every ~150 days on delivering basic government services, and every US citizen is on the hook for that, not just investors.

[somat]

It does not have to be bad, it depends on who they lost it to. Nvidea probably wins, the data center construction companies, electric companies etc. The tricky thing about an economy is that big picture "losing" means money is not moving and "winning" means that it is.

[bertylicious]

What's the company's name? And why the unnecessary secrecy in the first place? It's a publicly traded company so this information is public by definition.

[wmedrano]

We're talking about ~1 trillion $$$ valuations here tho

[nozzlegear]

What do you mean suddenly? People have been talking about it for as long as relatively early stage LLM companies have been noteworthy.

[quantummagic]

You misunderstand. He's saying there is a double standard, one for pre-LLM companies, and another for LLM companies.

[jchw]

For the past 3 decades, it really has been normal for companies to remain very unprofitable even up until their IPO, but I don't think it's actually normal in general. In fact, if AI investment really is a bubble and it pops, I reckon it could very well mark the end of this era!

(Is there a more extreme example so far of this than AI companies, just in terms of raw losses? As far as I know, Netscape's lifetime losses as an independent company "only" total a bit over $100 million dollars, which is a lot, it just doesn't look like all that much when put into perspective...)

[toomuchtodo]

The AI Bubble – No One's Happy - https://news.ycombinator.com/item?id=48230753 - May 2026

[dangus]

It’s weird to me that profitability is so thoroughly dismissed by the software tech industry because of an assumption that the tech industry will always be “early stage” and “high growth.”

We can look at a “success story” like Uber and it is still net negative over its entire existence. This is a business that’s in a literal monopoly/duopoly status in most markets it operates in with vastly reduced regulatory burden compared to the industry disrupted. Literally the ideal scenario for printing money and yet it hasn’t made any. It’s the poster child for the unicorn exit that founders dream of.

The end result is that Uber and companies like it are a financial instruments that transfer dollars away from one set of investors to another set of investors.

If Uber hasn’t yet made its investment back, I struggle to wonder how some of these AI ventures will ever make that money back when their expenditures make Uber look like a small little side project.

Meta has spent almost 4 years worth of its net income for FY2025 on AI going by this website’s data, and counting.

We are decades since Web 2.0 took off, almost 20 years since the iPhone launched, 50 years of Apple Computer. Software isn’t some new industry anymore. There isn’t an industry left that hasn’t completed its digital transformation. These spray and pray economies would have died off years ago if it wasn’t for the fact that software companies have uniquely low cost structures where they don’t need to build factories or distribution networks to get their products to their customers. These low cost structures might just be concealing the fact that it’s not going to be a growth industry forever.

[48terry]

And also: AI is basically the only thing anyone is talking about. Yeah, Uber existed and it's known about and was advertised and such. It has not overwhelmed every topic ever like the current LLM mandate has been. People are getting sit down and told they MUST engage with this stuff.

How has the sheer saturation of LLMs not resulted in profit? It has dominated the conversation, center stage, of every news outlet for like 4 years now. It is the most known-about thing currently out there.

And we haven't been able to convert that much captured attention into profitability yet? That seems... bad?

[dangus]

Right! I think the only example that comes to mind for me as far as “bled money for years and eventually became a cash cow” is YouTube. Most other ventures that bled money that long ended up dying.

Maybe Reddit is an example? But my impression is that they ran a modest operation before going public.

ChatGPT is the 5th most visited website in the world. Gemini.Google.com is ranked above amazon.com. Where is the profit?

[bix6]

But why would you make it profitable now? We are still in the early innings and its growth at all costs. Growing from sustainable cash flow isn’t fast enough for investors, they want HYPERGROWTH (now with RAWBERRY)

[abathologist]

It's not weird if you consider the details and the many ways that the situations are very different. But also, people cared about that other kind of BS too, e.g., https://news.ycombinator.com/item?id=39438372 or https://www.currentaffairs.org/news/2017/10/undercover-at-th...