[typ]

Unlike the belief that frontier AI is expensive due to a high margin, and going to be expensive if there is no competition. My understanding is that, under certain circumstances (which is most likely true), the price will be driven down just because of profit seeking.

The frontier LLM labs run on a huge fixed cost and very low marginal cost. They need the economies of scale to make sense of the business (an incentive to expand their user base as large as possible). Imagine that you want to buy a few B300s to run GLM 5.2 and rent the service out to other people. How could this business be viable and sustainable in the first place? You need as many customers as possible. If you charge everyone $1000, you find fewer customers who can afford it. It rots the ROA if the servers are not utilized 100% (you would better buy less compute instead).

Also, the marginal cost for onboarding a new customer is low. And it's getting even lower when you have more customers. You wouldn't leave money on the table (especially for your competitors) if you want to maximize your profit.

By this logic, all frontier AI labs are incentivized to lower the price to maximize their customer base, profit, and ROA.

[nr378]

> The frontier LLM labs run on a huge fixed cost and very low marginal cost.

> Imagine that you want to buy a few B300s to run GLM 5.2 and rent the service out to other people. How could this business be viable and sustainable in the first place?

My understanding is the frontier labs have huge fixed costs and relatively low marginal costs because they have to bear the cost of training the model/R&D, and then amortise that cost over their userbase.

By contrast, if I buy a few B300s and run GLM5.2 and rent the service out to other people, I can be profitable at a comparatively very small scale because I got the model for free.

[Gareth321]

I agree, but there is prestige to consider. Many people are motivated to buy the best, even if it's much more expensive. "We're building a mission critical application here. Sure the API costs are much higher, but it's worth it."

[mattmatheus]

Quite a lot of people think they're far better engineers than they really are, myself included. I've gotten better over the past few years at realizing that AI writes better code than me, which has made it easier for me to stick to architecture and let the (working) code be what it is.

[echelon]

I could spend $1000/day with Fable and it would be worth it. It has much deeper systems thinking, enabling me to trust it to follow my instructions and not fuck things up.

1. That confidence and quality is worth the price.

2. We're accelerating at lightning speed now. If you don't spend, someone else will and they'll eat your cake.

We're nearing the point where you could spin up an entire YC startup in a day. That changes the economics of everything.

[lgl]

I hear this all the time lately. Things like AI X or LLM Y can create a fully working company like "BigCorp XYZ" in N days/hours etc.

But is speed of creation really the golden goose here? A few skilled and motivated individuals could also do (and have been doing) that.

Sure, maybe they take a few months instead of days or weeks, but AFAIK, having a product is just a tiny bit of the battle, finding customers, product market fit, and actually growing it is where the gold is so I'd argue that you'd be better off building the product with a $100 day LLM and spend the other $900 on marketing.

AI won't automatically make everybody business gurus and every LLM generated company a unicorn.

[koolala]

Maybe YC could just give Fable 2 or 3 the funding directly. Sounds like the only thing left will be market control. The only winners being hardware gatekeepers and the investors in them.

[echelon]

Depends on whether open source can keep up. If not, this is 100% the future.

[cbg0]

> We're accelerating at lightning speed now.

Accelerating how much slop you can output? A better model will still produce slop for your feature factory that pumps out software which nobody is interested in buying.

[echelon]

I'm at a 3M run rate in 4 months. Because I'm solving real problems.

You don't seem like an entrepreneur. Why are you on HN?

YC wants people to build AI startups. You're here shitting on them. Half of this community is. You're all a bunch of old men grumpy at the new tools.

I'll offer my own analysis: if you're not using AI very effectively, you won't have a career in computing in a few years.

[nickthegreek]

You don't need to be an entrepreneur to be here. The majority of viewers certainly are not.

[cbg0]

I'm neither an old man, nor am I grumpy at the new tools. I use AI daily, I'm just not deluded into thinking AI is more capable than it is, or myself for that matter.