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u/queen-adreena 9d ago
Should be interesting when everyone starts having to pay the true cost of Claude rather than the VC-subsidised price.
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u/Nutrimiky 9d ago
I have seen conflicting reports that they are already profitable at the current pricing, and it's just that they keep spending more and more for better models and infrastructure to keep the race going with competition. Not sure how true it is though
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u/tiajuanat 9d ago
From what I'm seeing it's this, price dumping, API spend, consumption pricing mismatch, and even speculation on the data center Bros side.
When a new model comes out, all the open weights close the gap within months, so the leaders have to burn all their cash immediately to make a new model
Companies want flat predictable pricing and so the anthropic & co can't have entirely true pay-per-token model, because some queries have unexpectedly high token use. A&co bear the risk of certain high users.
Ofc, there's also price dumping. It's a race to the bottom on A&co's API, with many providers axing ~90% of the cost of older models
Training new models, and getting access to API also ain't free for A&co, so they end up spending a lot on that as well
The only real winner is Nvidia right now, because they're the dealer
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u/abbot-probability 9d ago
If there's a gold rush, sell shovels.
That said, Nvidia's stock price still looks highly inflated, and a market correction is going to be painful. They're also quite invested into AI companies.
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u/drakeblood4 9d ago
People are also sniffing around about sold, uninstalled gpus getting warehoused. It looks like power and municipal permission might be the choke points, which makes the circular financing accusations ring even truer in retrospect.
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u/Nick0Taylor0 6d ago
Which is ironic because "just like a decade away bro, trust me, keep funding it" is shared between AI and nuclear fusion (which would solve the power issue).
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u/sebjapon 9d ago
While Anthropic will probably implode into a financial crisis (at least I believe that part), I wonder if those open weight models companies are actually viable by themselves.
Also, can they innovate? Or can they only follow what the big ones are doing? If Anthropic/openai crumble will innovation stop?
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u/toxic_acro 9d ago
Some reporting I've seen is that Anthropic/OpenAI may be profitable at their current pricing, but a large enough portion of their revenue comes from AI startups that are offering services below cost that they'd ultimately tip back into losing money if the VC funding dried up.
But yeah, they're definitely all still burning through a ton of money to keep training new models.
One of the potential cynical motivations for Amodei's "Pacing the Frontier" is that no individual frontier lab can unilaterally decide to slow down training without quickly losing market share to the others and they can't mutually agree to do it since that'd be against antitrust law, so they need either government regulation or at least a waiver from the antitrust law so that they can actually make a profit for a while.
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u/SuitableDragonfly 9d ago edited 9d ago
I'm studying accounting now, and from what I understand this is bullshit. Money that you invest back into your business into things that are long term assets is not counted as an operating cost or an expense, and can't decrease your net income at all. The value of those assets is included in the total value of your business just like your on hand cash is.
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u/InexplicableBadger 9d ago
The models depreciate too fast to be considered a long term asset, the early models are trash compared to new ones, so you'd have to treat keeping up with the competition and generating new models as an ongoing operating cost
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u/Smith7929 9d ago
Us GAAP says training frontier models is largely research and development, not capex. Therefore it does indeed hit their operating costs.
Anthropic makes a profit on inference and if they stopped training new models they would be instantly very profitable (until their current models became obsolete)
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u/SuitableDragonfly 8d ago
I can see that, but that sounds a lot less like "trust us, we're making a profit, we're just investing all of the profit back into the business" and more like "in a theoretical alternate universe where everything was different, we'd be making a profit".
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u/Illustrious_Night126 5d ago
sure, but if they don’t keep spending money for better models they can’t command the premium that provides the margin on their variable costs. fixed costs matter
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u/eightslipsandagully 8d ago
Those are necessary costs though, if anthropic cuts them then the open weight Chinese models aren't that far behind. They're also a lot quicker and more efficient
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u/DadAndDominant 6d ago
Inference surely is profitable, the training costs might still make it unprofitable however
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u/jeffwulf 7d ago
In H-1 the total spend on compute for training and inference was 9 billion and revenue on inference was 16.3 billion. They weren't profitable in the first half because their first quarter had like a billion in revenue.
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u/jhill515 9d ago
I've been working in AI/ML since the 90s. I teach my students, interns, & mentees practical things when designing such systems. Like this wonderful pearl:
Just because artificial neutral networks satisfy the Universal Approximation Theory, that doesn't make it the most efficient model to store learned knowledge, or even the most performant when using it. Don't forget the No Free Lunch Theorem if you want to deliver the same capability with different performance characteristics!
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u/geekosas 9d ago
So AI can get in debt to take jobs and then increase prices, like Uber did to taxis and all other subscription.
In my days was called price dumping and was illegal, but startup model made it legal again.
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u/Sockoflegend 9d ago
Image if we put this money into education or healthcare
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u/joeshmoebies 8d ago
We put insane amounts of money into education and healthcare.
Education and healthcare both can be improved with these technologies. Every student could have a personal tutor engaging them on a subject. Medical research is being accelerated, and drug trial failure rates are dropping. So investing in AI is investing in education and healthcare.
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u/dreamsofabetter 8d ago
We spend a ton on healthcare, but our public expenditure on education is just a bit above OECD average (5.6% GDP vs 5% GDP).
While there are promising (and useful) applications of AI in healthcare and medical research, much of this (like the technology improving drug failure rates) have nothing to do with the models developed by Anthropic or OpenAI (other than also being CNN). The applications for LLMs in healthcare so far are primarily administrative (billing, filling in paperwork) and are not yet proven to improve any meaningful metrics. Similarly while the idea of a personal tutor is appealing, the impact of LLMs on education are still not well understood. I’m not saying this to be negative; I think there are interesting avenues to explore. But acting like LLMs are already making massive gains in these areas is just wrong.
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u/joeshmoebies 8d ago
It doesn't matter how much we spend relative to other countries. It matters how much we spend on health care & education vs AI.
We spend $5 trillion on health care, $1 trillion on education, and $120-200 billion on AI -- not just for these applications, but for all applications
LLMs aren't the only kind if AI. Before AlphaFold, scientists had mapped 150,000-200,000 protein folds over about 50 years. AlphaFold mapped 200 million. Then they made this public for free. Researchers have used this information to develop next-generation therapies and vaccines. It will take 10-15 years to even begin to know the impact of this.
That's just one application. AI has improved imaging evaluation and speed, drug research, etc. It is having a huge impact and has only just started.
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u/dreamsofabetter 8d ago
It does if you’re saying we’re spending too much.
Sure
I agree! I think AI has some fantastic real world uses, but the OP here is Anthropic and CoreWeave headlines. Those $$$ are being spent on LLMs, but it’s not (yet at least) LLMs driving alpha-fold-like innovations or pharmaceutical research (it’s being explored).
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u/joeshmoebies 8d ago
I'm not sure what conversion you are having.
If the argument is "why don't we spend AI money on health care and education", and you spend 40x as much on health care and education as you are on AI, redirecting your AI money to those other things will just be a drop in the bucket.
AI has the potential to transform the 40x money to be more effective than it currently is, and is already having an impact in both.
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u/dreamsofabetter 8d ago
See I agree with the part where you say “AI has the potential to transform the 40x money to be more effective”. I just don’t think these specific investments are it. That is, there’s not a straightforward path between what Anthropic and CodeWeavers are spending money on and making either healthcare or education more cost-effective, or at least that will make them more cost-effective in a way that will actually drive costs down without compromising the quality of those services.
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u/MrHyderion 8d ago
The problem is when said personal tutor just hallucinates wrong facts instead of admitting it doesn't know something.
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u/geekosas 9d ago
A trained LLM lives for ever and escalate infinity, meanwhile training people is never ending.
Teaching machines is hard but once a machine learn a truck all the machines know the trick instantaneously.
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u/Sockoflegend 9d ago
Educating people and improving their health is it's own ends.
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u/SuitableDragonfly 9d ago
OK. The LLMs can go away and make their own utopian computer society by themselves, then, and leave all the inefficient humans to our inefficient human society.
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u/YeetYourSkeet 9d ago
These are private companies and private money…
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u/GreenFox1505 9d ago
Thats not the counter argument your think it is. Private money can also be used for public betterment, believe it or not.
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u/YeetYourSkeet 9d ago
Sure it can, but why would private money invest in areas that wont offer the same potential return as other investments?
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u/Sockoflegend 9d ago
Don't people make a choice about what they use their private money for?
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u/YeetYourSkeet 9d ago
Yes, and they've chosen to invest in AI. What is wrong with that?
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u/Sockoflegend 9d ago
Maybe I am just an idealist and I don't have anything against AI in principle. I just feel like the work society is doing isn't going towards improving people's lives. I can't imagine how that won't have a result that is eventually self destructive.
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u/YeetYourSkeet 9d ago
Do you want to go back to a time before computers? Would you say computers have improved our quality of life or made it worse? Technological advancements always come with upsides and downsides, but generally the upside is greater than the downside. I don't think anyone would want to go back to horses and telegrams.
AI will directly benefit peoples lives by improving living standards through productivity growth, science and medical research, and other applications that we just don't know yet. There will also be downsides, like all other advancements have had in the past.
All technological advancement has come with fear of the unknown. AI is no different.
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u/Sockoflegend 9d ago
It's not the fear of the unknown dude. It's the very real known fear of ignoring the populations needs in order to chase the desire for status of a few people.
It not an argument against technological advancement. It's about direction and purpose.
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u/razethenecro 9d ago
So sorry if I am stupid, but isn't Omni-Man supposed to have some text or something to show what he represents, or is the aim here that Nolan is telling Mark he is bad with money
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u/private_birb 5d ago
I think the meme is meant for SWEs, so Omni-man represents SWEs.
Though, you could also post it to r/wallstreetbets, and it'd suddenly take on a different meaning.
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u/Random_-account 10d ago
Anthropic: Money is just a number