> What they don't understand is that the gross profit margins on AI model inference are very high.

Can we be sure of this? The second they tried to hike the prices to be profitable, they lost a lot of clients, or a lot of clients lowered they token expenditure. In any market margins tend to go to zero. I am using frontier models, but only because they are dirty cheap if not free. If they raise the price, I just switch to a cheaper model, start exploring the option of renting a GPU-VPS or buying my own card. Or reducing my AI usage, that currently includes stupid useless things like "translate this cooking recipe from french... for free".

> But if training becomes less costly and inference margins don't compress too much, it's a totally different story.

They are being priced as the "ifs" are certainties, and not only a possibility. If anything goes a millimetre below perfect for them, their finances collapse. High margins attract competitors, and unless you have a huge moat (and their only moat is expensive training), your high margins vanish.