This doesn’t solve the problem because (tautologically) the more AI prices go down the less money the companies make. If right now today the companies are operating at a profit and a price war causes the API costs to sink 90% next year, and their capex amortization costs stay fixed.

The math doesn’t math.

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skeledrew 5 hours ago | parent [-]

AI prices going down means the models are improving, particularly from the efficiency angle (which is inevitable, given the nature of tech). That means all they have to do is maintain a large enough customer base at a rate high enough to ensure loss decreases continuously over time, until eventually the pass the point where they're just gaining. Healthy competition ensures that improvement savings are actually passed on to users in a measured manner, so they don't become too greedy in trying to get to and increase gains.

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mikgp 5 hours ago | parent [-]

But now you’re describing a commodity, and the competition will erode profits, and their valuations are bananas, unless someone can find a business model that truly differentiate and creates a moat.

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simianwords 4 hours ago | parent [-]

Models are not commodities and are famously non fungible. Each model has its quirks and strengths, weaknesses and idiosyncrasies.

I know because I see how people went over the 4o model. I can see opus behaving clearly differently enough that I pick it for certain tasks.

	▲	mikgp 4 hours ago \| parent [-]
		Is this really for comparable models though? Will folks at scale continue to choose Anthropic frontier AI model if OpenAI releases a similar generation at a 90% discount with comparable capabilities? It feels like the fungibility assumes delineation by capability _and_ cost. No one is choosing sonnet over opus at similar price points.