Once the models are good enough, the companies can stop selling access to models and start directly competing with the rest of the economy.

Keep dreaming. AI is absolutely booming!

> It’s capital intensive, doesn’t easily scale without linear costs, is basically a commodity, and customers aren’t willing to pay what it actually costs

What are some VC funded companies that come to mind that do not fit this profile?

I think the closest analogy we have of the AI boom is the mid 90s browser wars.

First all the money went into the browsers like Netscape. Then the browser got commoditized, but that didn't mean the value went away. A better business model came along, and lo and behold, the Chrome browser went open source. The browser became free, and the scale of adoption meant a lot of value could still be extracted.

A free browser product didn't mean the value of Chrome went away. Rather the opposite. It's a gateway for buying stuff through Google search.

Marc Andressen was the "Mosaic browser" guy before he was the investor guy, so the folks in the early days did not lose all their money. Quite the opposite. Many are now billionaire oligarchs.

LLMs will likely go the way of the browser... commoditized, then free, then appropriated to shove ads into your face. I predict a lot of safety and interpretability research will be leveraged to one day push ads, just like "Golden Gate Claude" could be manipulated to think of itself as the Golden Gate Bridge.

> and yet somehow VCs caught a spell

Am I understanding this correctly as an idiomatic reference to an enchantment or curse? If so, I'd be interested to know where the expression "catching a spell" comes from.

(I'm really interested in the phrasing and I hope you don't take this the wrong way. For me personally, the metaphorical idea that someone with inexplicable behavior has been bewitched is a normal thing to express, but I'd be more likely to say they "fell under" a spell than that they "caught" it. I believe in Mandarin the usual idiom uses 中 "be struck [by a projectile]".)

Yes, separate from the “do AI startups have a viable business” issue is the datacenter debt bomb ticking on the horizon.

People made the exact same argument for years where Facebook stock stayed around 20 bucks post ipo. I did too and sold like an idiot!

That seems even less nuanced: bad economics AND they had a potentially illegal product.

Perhaps it's more that "consumer startups that want to become a unicorn" are hard.

> I think it's more nuanced than that.

So did they, they just left it for the conclusion

> It’s not clear whether AI giants like OpenAI and Anthropic, or the AI industry in general have gotten too big or too important to fail, but Character’s bankruptcy shows that the runway for second-tier players is over.

But the current title definitely baits more people into the article

The company was hallowed out broadly because it was a dead startup walking. It just took this long for an official bankruptcy to happen.

I doubt the NSFW-focused ones have taken on venture funding. They're probably leaner shops with a dramatically smaller userbase that is more likely to actually pay.

Before Grok locked down its video generation tools the amount of high-quality and stunningly realistic looking porn you could generate was insane. You’re going to need something like that in order to make billions of dollars in this space. I don’t think anyone is going to take the time/money and deal with all the legal implications that comes from training a video generation model like though.

Pets.com failed, therefore the internet is doomed. No one will ever make a successful business out of it.

Well said. The anti-AI sentiment is strong in a few camps on HN. Praying that AI will go away so as a software engineer, only familiar with the SDLC, you become relevant again is not a winning strategy. AI is like a soup with many bubbles, some will pop while new ones begin.

Groups desperate to prove an increasingly absurd suggestion are latching onto this because actual evidence of overinvestment or of broader correlated issues is thin on the ground.

News is less about inspection and more about speculation these days. Ironically, journalists are largely paid the same way Ai is, per word. The incentives might be better if both were "salaried"

That's overly generalized. Perhaps they became a buyer after google stripped top staff, but before that they were certainly a producer, and had many advances in cutting edge inference at the time.

They weren't paying frontier rates. They had frontier-level staff to train their own bespoke, hyper-optimised[0] LLMs until they didn't.

[0]: https://blog.character.ai/optimizing-ai-inference-at-charact...

> which are known to be ridiculously expensive at 90% margins

Is that known?

> which they will eventually

"eventually" is doing a lot of work here. Like sure, yes, eventually. But that could be later this year or it could be 50 years from now. We don't know the answer to that. Assuming it's going to happen in a timeline short enough to matter for this conversation isn't worthwhile. It's like saying eventually we'll have cold fusion, so why is everyone skeptical?

So, your contention is that 404media isn't taking into consideration a hypothetical where they wouldn't burn millions of dollars each month running something.

It seems harder to sell on device ai as a subscription, I would guess? although the much lower inference costs mean maybe you could just sell it as a one time purchase

By on device you mean running locally on a mobile device like an iPhone? If so we're a really long way from a chatbot that's engaging to talk to. There's just not enough processing power to do it

No-one's going to want to talk to a 7B model for more than 3 minutes

Isn't the majority of AI compute training and not inference? Saying "It doesn't matter if the AI companies fold because I can run models on my computer" is like saying "I don't care if the farm closes because I get my food from the grocery store"

AI doesn’t make mistakes like that generally, I’ve almost never seen the grammar butchery from them I’ve seen from even major publications in recent years. I wish they’d let AI copy edit.