| ▲ | LUmBULtERA 10 hours ago |
| >3. We're massively overusing SOTA models. As long as you're on a subsidized subscription, you can use Claude Opus 4.8 high to write blog article meta descriptions. If you paid by token, you wouldn't do that. This idea that the subscriptions are subsidized is repeated over and over, but I've never seen any proof of this. It seems to be entirely based on the inferred API cost the subscription usage could give you, but there are a lot of assumptions needed for that to follow. |
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| ▲ | oarsinsync 10 hours ago | parent | next [-] |
| > This idea that the subscriptions are subsidized is repeated over and over, but I've never seen any proof of this. It seems to be entirely based on the inferred API cost the subscription usage could give you, but there are a lot of assumptions needed for that to follow. My claude code environment shows me cost per token used in that session, according to API costs. It regularly exceeds $200. I pay $200 a month for my claude subscription. That's fairly obviously subsidised, unless you genuinely believe their unit costs are 100x less than what they're charging. |
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| ▲ | LUmBULtERA 10 hours ago | parent | next [-] | | The API inference cost to customers is not the actual cost of providing inference, and the cost of providing API inference need not be the cost of providing subscriber inference. | | |
| ▲ | brandensilva 5 hours ago | parent [-] | | This is correct, they are subsidized but it's the training cost that costs the most with a majority of people hitting cache for most queries for inference. |
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| ▲ | qtk8 10 hours ago | parent | prev | next [-] | | But they also determine the token prices. What you describe could also be true if they take a 5x profit margin on api tokens and 2x margin on subscriptions. | |
| ▲ | Eddy_Viscosity2 8 hours ago | parent | prev | next [-] | | You're being shown the price, not the cost. | |
| ▲ | hparadiz 10 hours ago | parent | prev [-] | | That's what they want to charge you. Not the actual cost. The actual cost is a gpu that's probably already paid off and about $2 of electricity | | |
| ▲ | t-writescode 10 hours ago | parent [-] | | Most prices, like GPUs, are amortized over several years, when doing the calculus. Maybe they're already paid off, maybe they aren't. I would lean toward "aren't". | | |
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| ▲ | erfgh 10 hours ago | parent | prev | next [-] |
| They are subsidized by the huge losses incurred by the AI companies. |
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| ▲ | LUmBULtERA 9 hours ago | parent | next [-] | | Data from OpenAI shows their 2025 inference revenue exceeded their cost of inference by a good margin (https://cdn.arstechnica.net/wp-content/uploads/2026/06/opena...). Saying this is being subsidized is like saying any investment in future productive assets is "subsidized". | |
| ▲ | usef- 10 hours ago | parent | prev | next [-] | | Anthropic have claimed they expect their first profitable quarter this year. As far as we can infer their current API prices have decent margins. | | |
| ▲ | Yizahi 9 hours ago | parent [-] | | Anyone can claim they are profitable, simply by reclassifying their expenses as some other thing or shuffling them to separate corporate structure. Until we will real financial audit, the CEOs claims are just a hot air. | | |
| ▲ | usef- 9 hours ago | parent [-] | | OpenAI's leaked documents also said OpenAI was profitable on inference. The small resellers of open models have nowhere near the resources to optimise their models or inference and yet usually have a lower cost, why wouldn't the big labs? | | |
| ▲ | Yizahi 8 hours ago | parent | next [-] | | That is exactly the document I've been thinking about while writing top comment :) . Oh, our "cost of revenue" is smaller than the revenue, we are so profitable guys! If we just don't count our marketing expenses, our administrative expenses, and our unspecified losses from operations to the tune of x3 times higher than our revenue. But if we don't count them we are totally profitable guys! If we will just stop all RnD and also stop paying our salaries, support and marketing departments (and also cut 20 billion of operational losses too, whatever that is) we will earn soo soo much monies guys! | | |
| ▲ | LUmBULtERA 5 hours ago | parent [-] | | Fair to include A&G, but their marketing and training cost is about generating future growth. People say that the subscriptions are highly subsidized as if its fact -- it's certainly not a well-established fact. These people simply don't know the truth one way or another, but portray their not well supported opinion as fact. |
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| ▲ | rightbyte 4 hours ago | parent | prev [-] | | The leak really doesn't say that. We have no way of knowing what posts are in the different categories. |
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| ▲ | chilmers 10 hours ago | parent | prev | next [-] | | Only if those losses are coming from subscriptions, instead of capex and training, which is not at all clear. | | |
| ▲ | smokedetector1 10 hours ago | parent | next [-] | | this argument assumes that capex and training costs will go down over time. but theyll have to keep up with one another and stay on top of latest knowledge so Im not sure if thats true | |
| ▲ | Yizahi 9 hours ago | parent | prev | next [-] | | "Our 2015 car models are totally profitable if we will just stop making new cars and continue producing only 2015 models for the next decade." | |
| ▲ | Hamuko 10 hours ago | parent | prev [-] | | I don't understand this argument. How does it make the subscription any less subsidised if the losses are only because developing the product is just so darn expensive? Feels like arguing that it's not clear if Bugatti's losses came from selling the Veyron instead of designing and developing the Veyron. | | |
| ▲ | fragmede 10 hours ago | parent [-] | | The equivalent is when Amazon was running a loss because they were spending all their money on building warehouses. It exactly make sense, but that's the argument. | | |
| ▲ | g-b-r 8 hours ago | parent [-] | | How often does Amazon have to rebuild their warehouses? |
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| ▲ | winternewt 10 hours ago | parent | prev [-] | | From the article: > What is happening here is that leading AI labs are charging not only for inference but also for research in model architecture, training data collection and curation, model training cost (which can be tens or even hundreds of millions of dollars), paying their employees and recovering the marketing costs. That's what's being subsidized. | | |
| ▲ | yreg 10 hours ago | parent | next [-] | | You are saying it as if those costs were not necessary to provide the service. | | |
| ▲ | LUmBULtERA 9 hours ago | parent | next [-] | | OpenAI inference revenue exceeds its cost of inference by a good margin in 2025 (https://cdn.arstechnica.net/wp-content/uploads/2026/06/opena...) | | |
| ▲ | jijijijij 9 hours ago | parent [-] | | Great, but that's only a part of operational costs. A craftsman's revenue may exceed the electricity bill for the power drill, doesn't mean the business is sustainable. | | |
| ▲ | LUmBULtERA 9 hours ago | parent [-] | | Day 2 the craftsman has not made up for the investment/loss of their equipment. Not a useful example. | | |
| ▲ | jijijijij 9 hours ago | parent [-] | | Sorry, I don't understand what you are trying to say. | | |
| ▲ | LUmBULtERA 8 hours ago | parent [-] | | The craftsman, who may otherwise be profitable, also has investment costs that cause them to show a loss for some time. | | |
| ▲ | jijijijij 5 hours ago | parent [-] | | "Otherwise". If the craftsman revenue isn't enough to recover the investment expenses, the business is operating at loss. But that's beside the point, because research investments are not the issue at hand. As said before: Interference costs are not the only operational costs. Same as electricity costs for the craftsman. Running a power drill is not the the whole expense to consider. The craftsman has to eat, AI company's employees have to eat. The craftsman has to learn about new building standards, the AI company has to train their models because no one wants to use a product stuck in time (that's not "research", just maintenance). If not even interference was recovered in revenue, nobody would even start to argue about sustainability. I can't debate this further, because HN is rate limiting my account for dissenting opinions in the past. |
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| ▲ | Paradigma11 9 hours ago | parent | prev [-] | | They are not. They are necessary for the development of future models, which does not influence the availability of the current ones. Plus you have chinese models distilling current SOTA for pennies on the dollar, so as a consumer I never will be worse off in the long (1-2 years) run. |
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| ▲ | jijijijij 9 hours ago | parent | prev [-] | | Is this supposed to be some sort of gotcha? Apart from research and marketing, that's operational costs. I mean, every product could be cheaper, if you didn't have to pay for employees and means of production. |
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| ▲ | heyoni 10 hours ago | parent | prev | next [-] |
| What assumptions are needed for inferring cost based on api pricing? |
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| ▲ | xboxnolifes an hour ago | parent | next [-] | | API prices are consumer prices, not costs. | |
| ▲ | LUmBULtERA 10 hours ago | parent | prev | next [-] | | The API inference cost to customers is not the actual cost of providing inference, and the cost of providing API inference need not be the cost of providing subscriber inference. | |
| ▲ | gck1 10 hours ago | parent | prev [-] | | That API pricing isn't massively inflated. |
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| ▲ | player1234 10 hours ago | parent | prev [-] |
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