How did Uber somewhat break even? They lost $34b before making a profit.
Uber was only on a path to monopoly in the US, not world wide. It’s lost to local competitors in most countries. And it can get disrupted by self driving cars soon.
OpenAI’s SOTA LLM training smells like a natural monopoly or duopoly to me. The cost to train the smartest models keep increasing. Most competitors will bow out as they do not have the revenue to keep competing. You can already see this with a few labs looking for a niche instead of competing head on with Anthropic and OpenAI.
How do you distill when OpenAI and Anthropic inevitably move to tasks running in the cloud? IE. Go buy this extremely hard to get concert ticket for me.
Distilling might only be effective in the chat bot dominant era. We are about to move to an agents era.
Furthermore, I’m guessing distilling will get harder and harder. Claude Code leak shows some primitive anti distilling methods already. There’s research showing that models know when it’s being benchmarked. Who’s to say Anthropic and OpenAI aren’t able to detect when their models are being distilled?
Yep the poster is assuming efficiencies will not come.
Absolutely they will. And this is a huge problem for OAI - given Google is targeting vertical integration, they will acquire a cost-advantage. As long as the model performance is good enough, they will kick OAI and Anthropic out in the long-run.
The valuations of OAI and Anthropic are nonsense. A true valuation would incorporate failure risk, which is natural for startups/fast growing and money losing firms. Anyone who takes them serious is incredibly delusional.
> How did Uber somewhat break even? They lost $34b before making a profit.
It took them ~14 years to lose that $34 billion. Some projections suggest that OpenAI has lost a third of that in a single quarter. Even the most optimistic projections indicate that they're losing that much every 2-3 years. There's talk that they might lose ~$150B before profitability.
These are just numbers on a page to regular people, but $34 billion and $150 billion are very different numbers.
And what possible moat. It isn't hard to foresee that in just a couple of years, models outpacing the latest frontier tech we have today will run on consumer hardware. With open source workflows anyone can pull in to run, providers won't see a penny.
Another scenario is that dense models get replaced entirely, in which case the likelyhood of OpenAI and co pioneering the concept is pretty slim. They will be left with billions worth of infrastructure which cost them 10 times that 2 years earlier, faced with the reality touched by the article: liquidate.
Seriously, what value are tokens providing other than justifying layoffs. Concretely. Today. Not in the speculating scenario that cardiologist could be replaced with models.
We see this new trend of agentic coding, again a promise software will be written that way going forward, despite the number of fiasco already experienced when trusting a model turned bad. The use case may provide value, but right now all it does is fullfil the push for token consumption all these AI leaders are advocating for.
It's ridiculous to call this tulips, in the sense of a speculative asset whose price depends on resale. A more similar recent example is the dotcom boom and bust based on building internet infrastructure, or the 2008 crash which was based on cyclical infrastructure overinvestment. These crashes were characterized by demand growth not keeping up with investment because the target markets were tapped out. Not clear when we'll get there with AI. The consumer market seems saturated on chatbots but we're not even close to saturated for b2b or self driving for example. And this discounts other new technological offerings which may unlock larger consumer markets (products where people are willing to pay $100 a month instead of 10 or 20)
All that said the dotcom boom is extremely analogous and that crash was quite bad.
dotcom was maybe 100B a year focused on the US and mostly VCs. AI is perhaps 250B global VC (with more than half of ALL VCs concentrated in one sector) and another 800B+ from non-VC. These numbers are basically a guess but structurally we are set up for something much, much worse.
But unlike the dot com boom, demand for tokens has not let up and there is increasing demand. I don’t know where it falls, certainly companies don’t get or right and they either over or under build. With the current demand rate changes it’s hard to understand why you would stop building today.
Demands for tokens exists yes. On one side you have huge demand for the infinitely subsidized tokens so that people can post a "unique" illustration when posting on social media, along with the text itself even.
On the other end we have professionals happy to pay a subscription for heavier use, to build something in the hope to sell it.
I figured I don't believe in value when my dad explained to me his mate fired his team once he realised he could just pay 20 bucks for his Gemini account and run his business. I asked, do you call this value add? He said it must be, since he can produce the same output with no staff.
There is a confusion between profiting from a circumstance and value creation.
You create value if, say, you cure a disease. That it takes you an army of staff or extract maximum profit from it is just a feasibility formula.
That you make the cure more affordable is value creation.
That you cure the same disease but increase your profit doesn't create any value, except to yourself, for a while
Maybe you don't, but it's fairly obvious that a lot of things are changing and things are moving.
Maybe your dad's mate didn't have to expand on his business, good for him. Other business are expanding because they now can.
Will the positive overweigh the negative? Not necessarily, but to go "it's tulip" is the kind of argument so devoid of nuance that we shouldn't be discussing so on HN.
The overwhelming demand for token would not coming from people wanting a unique illustration - it would be from professional usage. In fact, I'm not even sure who is subsidized. The $20 subscription surely isn't being used fully across all members of that subscription.
> Seriously, what value are tokens providing other than justifying layoffs. Concretely. Today.
Claude helped me implement a ridiculous amount of features in my programming language. It's helped me migrate the heap to an easily moveable index-based object space. It's helped me implement generators. It's helped me implement a new memory allocator. It's helped me fix a ridiculous amounts of bugs and make a huge number of small improvements everywhere. Its ability to provide me repository wide code review was a game changer for a solo developer like me. And it's doing so much more than that. I got more things done in the past few weeks than previous months even though I'm evaluating, learning, understanding and rewriting the AI output.
It's actually addictive to build things with Claude. The usage limits are starting to make me anxious, just like withdrawal syndrome. I applied for their open source max subscription program even though I'm too small for it because who knows, I might get in anyway and it costs nothing.
AI is quite literally a world changing technology. I hope the open models keep steadily progressing and that hardware remains available to all so we can run our own models on our own computers one day.
I am paying for it. I subscribed to the Pro plan about two weeks ago. The Max plan is a significant expense I can't justify. I straight up cannot afford the API prices as an individual.
Tulip futures skyrocketed, it was economic speculation on a useless asset, not supply and demand. Crypto is the analogy, not AI. Given that the major AI labs other than GDM are private, this is even more true.
Agentic coding absolutely blew up from demand, users are not being tricked into paying $200 a month, and they’re not complaining about hitting rate limits because it’s useless.
users are not being tricked into paying $200 a month
I can't believe people actually believe that people and companies are tricked into paying for tokens. My $20 Codex subscription is so useful, I can easily see myself paying $200 for it.
This belief is so common amongst AI collapse people online. I'm guessing these people have only used free ChatGPT or worse, they use Windows and get Copilot shoved down their throats?
Meanwhile, I'm flying around with a $20 Codex subscription doing everything from writing code, analyzing stocks, coming up with ideas, etc.
I'm paying $20 for Codex and $90 for the Claude Max plan. They are a "pry from my cold dead fingers" product for me.
IMO if someone tried this tech last time 6 months ago, or their only exposure is eg. via MS copilot, they do have a rational reason for skepticism. No technology of this complexity has improved this rapidly in my memory (well, ok, we had the CPU speed races from 90's to early 2000's).
The CPU speed race might be the most apt comparison I've yet heard.
From the 80486 to AMD Athlon64 X2 and much of that progress was enabled by better EDA being run on the more powerful CPUs being made with each improvement.
Now, we have better models helping to create even better models.
How about if they plateau but prices skyrocket? Most companies would pay but if you're not working for a company that does pay for it, what's the line beyhond which you'd think twice about paying for it yourself? 500? 1000? 1500?
Let's say they have already plateau. But hardware continues to get better, right? So tokens should go down in price, not up. Since they're already 50%+ on inference today, better hardware would allow them to generate more tokens for less money.
I would pay $500 to start, build stuff with it, then keep going up the tiers as the stuff I'm building makes money.
I know there is a large force on HN that want to deny the value of tokens and I know it’s anecdotal but the writing is on the wall. If it’s not valuable to your workflow today it will be soon. I already have tests being written, automated hooks into bugs where an initial PR gets generated with a potential fix. It’s far from perfect but junior engineers are far less productive.
In the last eight months, my solo SaaS has gone from $0 to $325k ARR, and growth is accelerating. I run tens of billions of tokens per month through automated pipelines for the product itself (which replaces an ultra niche human-driven process in a very non-technical industry), plus probably low billions more per month for coding, systems operation and management, data analysis, etc. And I feel like I'm just barely scratching the surface of what today's models are capable of.
are you seriously comparing AI to tulips? I don't even know what to say. Even if you are very bearish about the technology certainly you can't be this detached from base reality. Yet here we are
> Seriously, what value are tokens providing other than justifying layoffs
Like the OP said, it's incredible how polarizing this debate is. When I read comments like yours, I feel like a significant part of the global workforce in IT must be living on another planet? Or they never really used Claude Code, Codex, OpenCode, ... intensively before because of company policies?
I legitimately am at least 10x more productive than a year ago, and I can prove it in number of commits and finished monetizable features developed per day. Obviously my workflows still very much require an active, constantly context-switching human-in-the-loop, but to me there's absolutely no question both output volume & quality have skyrocketed.
And that's my point about value. That engineers can spit out far more code, or that they don't have to think much is surely precious convenience.
Value add so far lacks evidence.
Layoffs. It justifies them to the public. I'm not certain it grants them as it contradicts a principle of enterprise: scale, as much as you possibly can.
If tokens provided value today, we would be hiring more engineers to review their output and put things together.
I literally wrote how I measure this in the post you are replying to: #commits which is admittedly a worthless proxy for productivity, so, more importantly, number of finished production-ready features delivered.
That number is at least tenfold of what it was before, simply because I can run a lot of gruntwork in parallel now without wasting brainpower and focus on that stuff.
There are millions of other wanna be engineers doing exactly the same, assuming demand will scale as much as the offer.
What returns are you getting on those?
Let me create 500 websites, deployed for free, I hand that over to you by end of day. Will you give me a cent per piece? If so, happy to do business with you.
The value is obviously to the people who will use this to replace engineers.
I would happily pay $200 a month for this. Luckily I dont need to, it's free.
Literally every game and website that I would have had to pay someone else to make I can now make myself. There's no value in that?
A year ago the best free LLM couldn't even give me a basic gridmap and collision. Now it can give me a full RCT style prototype & editor in 20 iterations.
I can only imagine what improvements we will have NEXT year!
There are over 2 million games, for Android alone.
That you weren't making games before the advent of LLMs makes it cool for you to build, and at no cost. But people have been able to make games without them and already grew the market to saturation.
If the outcome of LLMs is that we get more games, it won't imply that people will consume more games. Most games never get played anyway.
There's nothing to "ponder" as you so patronizingly put it, and your stats on gaming are self-evident.
Op never said they're selling games. They said they're making their own games and websites for a fraction of the cost (even $0). That's amazing value. And it's just getting better.
The funding is in anticipation of AI becoming so good that mistakes are only seen in the most complex output. In consumer applications, it's hard not to see that happening, given the exponential improvements of the past year. Whoever gets there first can capture the market.
I say this as someone who has used them to boilerplate/scaffold a bit of code by this point: Economic Value of LLMs is debatable, if only because they're being too broadly applied.
This is changing the narative. Nobody really cares about tulips and some dumb throwaway comparison. Unless LLMs are worth an awful lot the math here does not make sense. That is both debatable and important.
Since I brought up the tulips: People do care about Tulips. They do have value. So do LLMs.
How many people will remain willing to pay for them, and how much, is what we call speculation.
No it isn't changing the narrative. Tulip bulbs were a huge bubble based on speculation, completely. No one ever used a tulip to create a piece of software, or anything else. Their economic value was precisely 0. The whole thing was based on a bubble. LLM's may be IN a bubble, but they aren't tulips.
Not crashing yet. The article is looking 1 to 5 years to come.
Given Nvidia's CEO's agitation I would give credit to the prediction, and if it's correct the price will go back to what it was, or even lower of investment in capacity are made today.
If I need storage now and I can't get flash disks, I will buy mechanical. Production will not ramp up overnight (or at all - there is no point investing in scaling up if I think the situation is only temporary), so an increase in demand inevitably will result in prices going up.
Btw gas goes up when oil goes up not just because it can replace it in some applications, but also because it is often produced and transported in the same areas as oil, by the same companies involved in oil, so it is typically affected in similar ways.
Customer demands (or hoarding) sentiments kept us busy on the production lines of racks with 1K+ drives and I think we've already shipped out more than 5K of them since early last year. No supply constraints on cpu and memory parts due to the way this sku was designed but damn did we have so many defective hdd's; I'd ballpark about 20% from the vendor and 10% from mishandling.
Yeah I have no idea the direct cause. I didn't think that the SATA controllers for a hard drive took that much.
It could be a secondary effect; SSDs have gotten so expensive that people are willing to put up with spinners and thus there's an increased demand. No idea, I'm sure an economist or something will do a write up of the downstream effects of the RAM crunch causes eventually.
These days most LLMs respond with unsolicited grandiose feedback: you've made a realisation very few people are capable of. Your understanding is remarkable. You prove to have a sharp intellect and deep knowledge.
It got me to test throwing non sensical observations about the world, it always takes me side and praise my views.
20% of the time coding doesn't mean bureaucracy, or ceremonies. Although those exist. And for reasons.
We spend 20% of our time coding because compréhension and communication takes up the other 80%.
The same applies to most jobs in fact. If AI can make a Latte, are barista out of work? They spend 20% on the machine because of bureaucracy ? The hello sir, how's your day been are ceremonies. Much needed ceremonies even though nobody cares and say "fine thank you".
Since the premise is flawed it's hard to make an argument about the future of engineers.
Openai can't claim either.
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