> The frontier labs have fantastic margin on inference. You do not understand how fantastic. And they have license to change inputs at will based on profitability.

This. The gross margin on inference is at least 95% if not higher - several open weight models on my tiny consumer DGX Spark easily replace the 15 dollars a day I was paying in tokens for Claw usage with a dollar a day electricity. You add data centre overhead and depreciation, the theoretical net margin will trend lower but depreciation is always far more aggressive than actual product degradation. The old NVIDIA GPU on a 9 year old second hand gaming PC I bought still serves up a small Gemma 4 variant quite reasonably.

> The frontier labs have fantastic margin on inference.

Source?

The OpenAi filing will be very interesting indeed.

("trust me bro" statements from sama et al does not count, since I don't trust them)

Edit:

The best argument I have seen look at the price of inference from smaller companies running open models. And assuming they are profitable-ish. Their prices are lower than the OpenAi and Anthropics best models, so maybe they do make money on inference (ignoring all other costs)

This doesn't sound like Claude at all to me. Which is a good thing but wonder where that came from.

> Customers are finding value.

Where I can find confirmation of that in public sources?

The old model works at tens of millions, not hundreds of billions. All the private capital is pretty tapped out, and banks aren't loaning (thank god). So they don't have investor money to burn (and when they do, they immediately burn it on new datacenters, which usually take years to build and aren't a certainty). That's why they made equity deals with hardware companies... it was the only way they could "afford" hardware. But someone has to pay for that hardware. And the person paying is... the hardware companies. They have a lot of cash, but not hundreds of billions of cash. Hence why Oracle pulled out, Nvidia scaled back its investment. Claude only doesn't suck right now because SpaceX literally loaned them a datacenter. So I'm saying... these companies will run out of cash, if they can't get paid back, sooner than later.

When OpenAI goes public it will initially get a tsunami of cash, but it'll also be open to new risk due to the different operating model and transparency. Anthropic might not make it to an S-1 (this year). Even if they got a $30B infusion of cash each, based on their current spending projections, it doesn't cover half of what they need just to break even. In the meantime the PaaS's are holding the bag (and shedding cash).

So where's it going to end? To me, all of this (combined with inflation, degrading of reserve currency, war in middle east) is spookily similar to the railroad panic of 1873. Over-investment in new technologies leveraging too much from the largest financial institutions resulting in prolonged economic crisis. Our only saving grace now are laws ensuring banks have to cover their end; if your money's FDIC/SIPC insured you're safe. But all the businesses and individuals who aren't safe are gonna take a bath, which'll have systemic ripples. Afaict, Google is the only player who can survive all that and come out with profitable AI. (But I'm sure I've missed something because it seems too obvious)

Outside investment is not a revenue, it's looking more like a pyramid scheme. It's yet more people putting their money in the scheme expecting a return

Either the actual revenue of paying customers ramp up or the bubble will pop at some point

I expect the paying customers will actually be companies buying ad, not people buying AI subscriptions