| ▲ | treis 6 hours ago |
| There's no realistic way for the music to stop. The demand for LLMs is staggering and the big providers are charging full freight for inference. They might not make back the money from training but these data centers are definitely going to be fully utilized for at least the next 5 years. |
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| ▲ | SlinkyOnStairs 5 hours ago | parent | next [-] |
| > the big providers are charging full freight for inference. Except they're not. Anthropic's claims of temporary profitability line up exactly with when SpaceX is giving them discounted compute, OpenAI's such a shitfest they threw the CFO off the glass cliff for daring to push back against the IPO. "Profitable on inference" is an unsubstantiated rumour. Just look at the copilot changes. Demand switching to other providers immediately when prices rise, and there's not even certainty that the new copilot prices cover costs. > They might not make back the money from training This is an understatement. With all the datacenter buildout, they need trillions. For the investors get their money back and the bubble to not implode, they functionally need to unemploy everyone in the US. If the AI dream is real, society just breaks. |
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| ▲ | icepush 4 hours ago | parent | next [-] | | Unemploying everyone was what openai described as their success condition when it was founded a decade ago. There was a q&a on their website that said "How will you know when you have reached AGI? When the system performs most or all economically valuable work." Lots of people thought they were joking, or it was marketing, but they were 100% serious from the first. | |
| ▲ | simonw 5 hours ago | parent | prev | next [-] | | > "Profitable on inference" is an unsubstantiated rumour. So is "unprofitable on inference". Thankfully we should find out for real as soon as those S-1 documents arrive. | |
| ▲ | treis 5 hours ago | parent | prev | next [-] | | The pricing on Open router is clear. Anthropic, OpenAI, and Google all garner a massive premium over deepseek and qwen. There's no other realistic explanation except that they're making bank. | | |
| ▲ | bootsmann 5 hours ago | parent | next [-] | | I can sell the tomatoes in my garden for twice the price of those in the supermarket and still make massive loses. | |
| ▲ | SlinkyOnStairs 4 hours ago | parent | prev | next [-] | | > There's no other realistic explanation except that they're making bank. If they were, they'd never shut up about it. Yet they keep quiet about the financials. | | |
| ▲ | treis 3 hours ago | parent [-] | | They don't shut up about it. Profitable on inference has been the story for years. |
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| ▲ | johnsmith1840 4 hours ago | parent | prev | next [-] | | Why do you think Chinese companies can do that? It's government subsidising price they do it with literally every ibdustry. Home grow a bunch discount them federally, let them wipe the foreign markets. If AI is threatened by china why would US NOT do the same? If they did they're in a much stronger position to do so than china. Cheaper energy, more cash, stronger industries. Infrastrucure is thr kind of thing that only a foolish US admin would let fall apart to their advesary. | | |
| ▲ | treis 3 hours ago | parent [-] | | It's not all Chinese companies. It's some western companies running Chinese models. |
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| ▲ | boarsofcanada 4 hours ago | parent | prev [-] | | And yet they are not profitable on an ongoing basis, and aren’t even claiming to be. The supply is currently constrained because 50+% of data center plans were cancelled as a result of the impossibility of the buildouts happening in a timely fashion, and subscriptions are charging a small fraction of the actual cost of inference, leading them to all bleed money, hence the rush to IPO to get one last infusion, since many of the past investors have publicly stated they aren’t putting any more money in until they see an ROI. | | |
| ▲ | treis 3 hours ago | parent [-] | | They've stopped subscriptions for the most part. Companies are paying API rates for their employees. | | |
| ▲ | boarsofcanada 3 hours ago | parent [-] | | Companies are hitting their budgeted limits for AI tokens less than half way through the year and reporting that they aren’t seeing enough benefit to substantially increase that budget, and so they are scaling back use and asking people to be prudent rather than token maxxing. In the meantime subscriptions still exist in the form of chatbots and it’s easy to exceed the inference cost of the provider by simply using your daily, weekly, and monthly limits. The reality is that we just don’t seem to be at a point now where people are willing to pay full price for the perceived value. Perhaps we’ll get there within another generation or two of hardware and software improvements. |
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| ▲ | WarmWash 3 hours ago | parent | prev [-] | | >For the investors get their money back and the bubble to not implode, they functionally need to unemploy everyone in the US. More like $75/mo per user for the next 5-10 years if they can get 5% of the global population to pay that. |
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| ▲ | alfalfasprout 5 hours ago | parent | prev | next [-] |
| > the big providers are charging full freight for inference They're not and it's not clear why you seem to believe that. The immense capex for buildouts, training costs, etc. are not rolled into inference costs. Moreover, companies are already rapidly starting to re-evaluate token spend. |
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| ▲ | stefan_ 6 hours ago | parent | prev | next [-] |
| Data center operators are in the business of selling electricity. They do not command large PE multiples. This is an even worse business, because xAI decided to also be the bagholder for the NVIDIA graphic cards. Not to mention they finance an unreasonable number of 20-somethings on way too large salaries with shitty opinions and no AGI delivered. |
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| ▲ | _alternator_ 4 hours ago | parent | next [-] | | This take clearly has a bone to pick. But ignoring that, the first sentence is just not reflective of the reality here—xAI is making a killing on renting out its GPUs, way more than "just power". The dynamics that normally make infrastructure providers have slim margins don't apply when demand far outstrips supply; the situation right now is closer to monopoly pricing power. It will likely take a few years for supply to fully catch up, which means xAI will eat well for a while. I can see a world where a few data centers come on line this year and reduce margins a bit, but it's crazy to think the margins will go to "cost of electricity plus a few percent" anytime soon. | | |
| ▲ | alpha_squared 2 hours ago | parent [-] | | > xAI is making a killing on renting out its GPUs, way more than "just power" What's your evidence for this? Because from the S-1, SpaceX is largely an internet service provider that happens to launch rockets and own xAI. | | |
| ▲ | PixyMisa 2 hours ago | parent [-] | | In the article, it states that the two deals will cover the entire cost of SpaceX's AI buildout in 18 months. OpenAI and Anthropic would kill for that kind of cashflow. |
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| ▲ | chatmasta 5 hours ago | parent | prev | next [-] | | Datacenter operators who rent space are selling electricity. SpaceX is selling a fully built datacenter with compute designed for a specific purpose. They’re operating at a higher level of the value chain and can charge accordingly. | | |
| ▲ | SecretDreams 5 hours ago | parent [-] | | What's their novelty or moat to maintain the value chain? And why do we only see google, who already owns it, raising their hand to rent at these prices? | | |
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| ▲ | treis 5 hours ago | parent | prev | next [-] | | They're not any sort of bag holder. They're going to make back what they spent on these data centers in a year. It's a fairly sweet deal for everyone involved. Anthropic/Google get to sell more tokens and xAI gets a war chest for another bite at the apple. I don't have much confidence that they'll do anything with it but that doesn't mean these deals don't make sense for them. | |
| ▲ | jtbayly 5 hours ago | parent | prev | next [-] | | There is a footnote in the article does the math. It concludes, "power is no more than about 1% of revenue." | |
| ▲ | skybrian 5 hours ago | parent | prev [-] | | I thought it was mostly capital costs (chips), not operating costs (electricity). |
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| ▲ | SecretDreams 5 hours ago | parent | prev [-] |
| Look, there's two things: * LLMs are useful * Company valuations around LLMs are not realistic Both can be true, much like they were during the Dotcom bubble. The internet turned out to be a pretty real thing. A couple examples below might feel familiar in the next couple months/years. > Blucora (then InfoSpace): Founded by Naveen Jain, at its peak its market cap was $31 billion and was the largest Internet business in the American Northwest. In March 2000, its stock price reached $1,305 per share, but by 2002 the price had declined to $2. > Broadcast.com: A streaming media website that was acquired by Yahoo! for $5.9 billion in stock, making Mark Cuban and Todd Wagner multi-billionaires. The site is now defunct. > eToys.com: An online toy retailer whose stock price hit a high of $84.35 per share in October 1999. In February 2001, it filed for bankruptcy with $247 million in debt. It was acquired by KB Toys, which later also filed for bankruptcy. > GeoCities: Founded by David Bohnett, it was acquired by Yahoo! for $3.57 billion in January 1999[20] and was shut down in 2009. > MicroStrategy: After rising from $7 to as high as $333 in a year, its shares lost $140, or 62%, on March 20, 2000, following the announcement of a financial restatement for the previous two years by founder Michael J. Saylor. ** Some scams transcend time ** Great link: https://en.wikipedia.org/wiki/List_of_companies_affected_by_... |
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| ▲ | joxdosba 5 hours ago | parent | next [-] | | Btw how much is MicroStrategy down since the year 2000? | | |
| ▲ | SecretDreams 5 hours ago | parent [-] | | I was expecting this comment. You know the answer. A scam will keep scamming. There are also legitimate companies from the dotcom bubble era like amazon, microsoft, and intel. They all were vastly overpriced during the dotcom era. Probably also now lol. |
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| ▲ | dluxem 5 hours ago | parent | prev [-] | | I am of the same mindset as you, but you also have to look at PE multiples of Cisco in 1999 and Nvidia today. One being the "ammunition" supplier in the battle for the Internet, and the other supplier in the battle for AI. Cisco was over 400 at one point and Nvidia is around 30. Not quite the same. Other players today:
- Digital Realty 48x
- Equinix 75x
- CoreWeave (still losing money) There is likely a bubble of some type here, but I don't think this is the same as the Dotcom bubble. | | |
| ▲ | SecretDreams 5 hours ago | parent [-] | | The circular financing aspects in the current era are really obscuring some of the financials. There are also very legitimate companies offering very real products. The big issue today is that things feel a lot more obscured and interconnected, which makes it hard to discern shit from gold. Does not help when the gold and shit are swimming in the same circles and shaking hands with all the same people. |
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