AI is based on massively subsidizing users’ costs. Once those subsidies end, what’s left are costs, not profits. Play that any way you like, but massive subsidies are not sustainable, though they generate a temporary illusion of viability that can be exploited by those selling a fantasy of future profitability to credulous investors and enterprises.
Left unsaid is a lot of money is being gambled on the illusion that subsidies are sustainable. They’re not. Enterprises don’t have profits, they have costs.
An important point is missing, and the headline is misleading: The flagship models are unaffordable.
More energy efficient models with (even) less accurate results are a fraction of wage costs. So they would be very affordable to give an existing worker an extra tool. Just no reason for widespread use as long as the “subsidised” ones are available well under cost.
Whether this extra tool does more harm or more good is a different question; due to the hype of using it everywhere for everything, the former is often true.
I’m sure that, in theory, are careful and considerate use can be helpful. For example, as a coding agent, when I give it a simple task like I would a junior dev, and I’d check everything anyway. Things like adding a field to a form and applying it to UI, middleware, database, automated tests first etc.
As Cory Doctorow put recently, selling $40 for $1 is a great way to generate demand but not a great way to stay in business.
Once AI stops getting subsidized, the house of cards topples immediately
This was written by someone who doesn’t really understand the ai game plan.
First, it’s stealing all the data possible for use before their are any laws or large payments required.
Second, is to keep pace enough to be one of the 5 biggest providers and crush or buy out anyone else in order to have as close to a monopoly as possible.
Third is eat the costs and bleed money for like 5+ years to get so many people so used to using AI that they won’t hardly be able to function without it.
Then last, start climbing the prices up and doing away with the public getting to have a “free” version. This is where the market gets cornered and profits start coming in. The people who use it will drop, so no more dumping money into more expansion and more electricity\costs. The corporations that need to keep using it will be paying much, much, higher prices, and law offices and hospitals, and mortgage agencies and brokers will just absorb the costs. Then their will still be some people paying a somewhat high cost for a dumbed down bit of access, like small businesses or college students.
There’s one gaping hole in the plan, the sale price where becomes profitable for the AI companies is far higher than consumers are willing to pay and unprofitable to run a business on, it’s not a viable plan
There are lots of problems with this approach, though. The product isn’t worth the non-subsidized prices. And also, free, self hostable models exist and are also getting better every day.
So it’s too expensive and they can’t completely corner the market.
“We lose money on every sale, but make it up on volume.”
It’s like every internet business plan from 1997!
If a strategy worked for one thing, it’ll work for everything. 👍
Even WITH subsidies it’s unsustainable
There is no way to make solving all of your problems with brute force economically viable.
That graph is not accurate: it more says “some countries are bigger”, and also doesn’t count size of DCs nor how they’re cooled. BTU, square meters, and how much evaporative cooling BTUs per capita are the numbers that matter.
This graph shows none of that. Yes, America would still be way out of whack, but we can show that with an actual comparison instead of this lazy journalism.
At the end of the day the AI war is a production war, and China already won. Right now they’re just pacing the field and waiting for US companies to over extend themselves. The extra time also allows them to lay in place more efficiency of their own.
Don’t worry, the US government will step in and make it illegal to use Chinese models for “national security” reasons.
Is the new oil, gas, coal and nuclear power
Bailout is in order.
