Cross posted from https://sh.itjust.works/post/65157881
“If 70% of AI revenues are these two companies, there is no AI industry.”
Writer of Where’s Your Ed At and the host of the Better Offline podcast Ed Zitron joins The Tech Report’s Isaac Pound to talk about the state of the AI industry as it’s revealed that over two thirds of hyperscaler AI revenue is coming from two companies.
They’re not building a consumer product, they’re trying to replace workers. They’re paying for R&D to get rid of you, not selling a product. We are not part of the plan.
No high level manager is running fucking Claude code. It’s too much like an actual job to run these things.
The DeepseekV4 architecture was the eye opener to me.
Qwen 3.8 27B too. Minimax M3…
They are sooo dirt cheap to run, and “good enough.” And they’ve barely picked low hanging fruit of inference optimization.
No matter how anyone feels about the utility of LLMs, one just can’t argue they’ll need all these datacenters, if you look at the architectural trends. It makes no sense.
So once the music stops… what happens?
Same thing as what happened after the dotcom bust.
WebVan was a very future thinking business, trying to get ahead of everyone by offering grocery ordering services.
But they did it during a time when no one trusted putting credit card info online… So they failed, and the bookstore Amazon.com replaced them 2 decades later when market trust proved people will pay for anything online.
But WebVan had billions in investment and opened warehouses and datacenters nationwide if I remember correctly. Their business went kaput overnight because they couldn’t afford to pay employees once investors stopped investing. And other people bought up their old stuff, probably at a huge discount.
Same shit will probably happen. OpenAI and Anthropic will be in debt and not able to go into deeper debt. Cashflow stops. They realize they have to pay back some people and go bankrupt, and they pay back their closest friends or shell businesses that are in their own name. “Oh no I owe myself rent” type of situations, shady shit where they take all the rest of the money and run.
Employees get walked out the door by security guards, and leave anything of value they can sell off like laptops. Datacenters get sold off to the highest bidder. People start doing other shit with it.
Those dotcom bust data centers ended up being the reason the internet boomed after too. They invested soooo much into internet infrastructure… and we eventually needed it. Amazon went from book store to anything store to internet backbone.
We’ll likely see companies like Amazon and apple and Nvidia eat up all this shit they invested in and take over and start doing more. Wouldn’t be surprised if Nvidia ends up running Nvidia web+ai services, but not below cost, and finding other use cases.
Right now no one trusts LLM like no one trusted paying for shit with their credit cards online. Eventually a balance will be found and market trust will adapt more. I doubt anyone will ever read slop books or buy slop movies, but the tech will improve and start to do shit we’re not thinking of right now. It will evolve, and consumer trust will too.
The market crashes. Grandpaw crashes and everyone dies. h0NoR tHy fAtHeR aNd m0ThEr!!! rEsPeCt y0uR eLdErs!!!
OH come on, revenue != profit. That’s why it’s a boom (bubble).
The profits are near zero, AFAIK negative for OpenAI, but you are missing the point. namely that 2 companies that aren’t even making money, are responsible for 70% of the revenue for the data centers. Meaning the data centers don’t have a sound business model.
So the ginormous investments in data centers are moronic.Their profits are negative for both of them. OpenAI makes a couple of billion a year, but they owe hundreds of billions, with more debt incoming. The same must apply to Anthropic. Their collected debt is around one trillion dollars.
There is no sign they will ever be profitable, especially because they are bleeding customers to Chinese open source LLMs.
In any sane world that would be game over, but somehow mega investors have decided that they need to double down. Because if only they invest more, the profits will come eventually.
I mean surely it’s because it’s about buying a part of “the future” and leaving everyone else behind. For such a belief, going all in may be the only option. Which is, of course, kinda death culty.
Yes it kind of seems like a financial death cult.
SpaceX IPO was 90% XAI 10% spaceX.
They made up an IPO price bypassing the bankers and then forced it into everyone’s Retirement Accounts with early adoption into the indexes.
OpenAI and Anthropic will do the same. They will pump it to the moon. Then IPO to the moon Vic’s will cash out at 100x profit as everyone’s retirement crater and reduce by half.
At the same time the economy goes great depression 2.0 as the bottom drops out.
They are talking about a value of $2 trillion for Anthropic. Somebody is going to lose a lot of money.
Be long puts.
They spent 38.5 billion on 13 billion in revenue last year. Even if you take out training costs, operational margins are negative at a cost of 14.8 billion as long as you include sales and marketing, which you absolutely should because they are clearly hiding expenses in that bucket. Nobody would spend 5.7 billion a year on marketing when they’re already losing 20 billion.
The profits are near zero, AFAIK negative for OpenAI
https://isaiprofitable.com/ is fun to watch!
Wow, anthropic have really been raking it in since last time I checked, they’re only at 33% negative profit, best in the industry (apart from the the hardware manufacturers, who are turning a profit on the infrastructure).
That’s insane. 😱
