I see at least two potential positives in this:

- The frontier AI companies have realized they won't be able to count on gaining ground and earning more in the future through sheer moat. They have to start earning right now.

- The playing field on the market got a whole lot more even as a result. Now everyone is competing on cost and quality - while there are still a lot of competition. AI suppliers can't easily get away with subsidizing their own product and enshittify later.

I might be missing something obvious here? It feels to me that if the frontier AI companies thought they could gain a lot more moat they wouldn't raise their prices this much this early? And their current moats/head start doesn't seem insurmountable?

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mrweasel 2 hours ago | parent | next [-]

The idea probably was to pour billions into technologies powering these LLMs, and gain a moat. It then turns out that this isn't as hard a problem as expected, it's just very expensive. So as long as you have money, you can be an AI company, the money is the moat (unless you take a shortcut, like DeepSeek) and money is running out.

I don't think you're missing anything, but I am surprised that the forces behind the AI companies did. They do need to start making money, but I don't think anyone has a plan as to how they are going to do this. As for enshittification, that was always on the table for the free tier, it was also going to be the drug deal strategy, were the first hit is free.

The cost of AI is still to high, datacenters aren't being completed, the hardware is to expensive, electricity is to expensive, the technology is good, but requires hand-holding. We're going to see AI being deploy more sparingly and more targeted, so the cost is justified.

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lenkite 2 hours ago | parent [-]

> They do need to start making money, but I don't think anyone has a plan as to how they are going to do this.

Doesn't this just mean price increase ? What is not clear is how much the price needs to increase for AI companies to break even some time. 3x increase ? 10x increase ? Even more ? No one seems willing to give a clear number.

	▲	mrweasel an hour ago \| parent [-]
		You can only increase the price so much. With every price increase you're going to lose customers, which could lead to further price increases. I'm not entirely convince that the AI companies can raise prices and keep enough of their customer base to make their current strategy commercially viable. They could also lower their production cost, but that runs counter to building/buying new datacenter capacity. Realistically I think they need to look for applications where cheaper models are just as good and niches that where the ROI on AI is more clear.

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operatingthetan 2 hours ago | parent | prev | next [-]

>AI can't easily get away with subsidizing their own product and enshittify later.

They have to do it in reverse order which seems to be maybe impossible. I contend that SOTA models are still quite bad at what their companies claim them to be good at. They remain confidently wrong more often than they should be. The public also is tired of 'slop' and will continue to push back on it.

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lukas221 2 hours ago | parent | prev [-]

the moat always has been and will be compute

and we are fast approaching limits which will be hard to overcome - electricity, chips

	▲	worldsayshi 28 minutes ago \| parent [-]
		Don't you think that we will eventually get more specialized hardware that will greatly improve efficiency? Running neural networks on GPU:s seem like quite wasteful?