Maybe at first, but server hardware doesn't stay deployed tooo long and ends up liquidated. That was always a looming problem with this rapid buildout. Some hosts like OVH or Hetzner might swipe up some second hand gear, they're not afraid of renting old hardware. But eBay will be flooded once the DCs upgrade / downscale. And it wont be cheap at first either I bet. Everyone will try to cash in on the secondary market hype.
Over last 3 years on HN I have seen such low quality comments : prophesizing the end of times - the bubble will burst and we will all be so happy after that.
Any tiny news article that indicates even a modicum of challenges for OpenAI will be met with slurry of such comments.
Perhaps it’s good to keep a good epistemic hygiene in all this. OpenAI isn’t going away anywhere soon. AI isn’t going away, in fact we haven’t even started yet.
It's a reaction to the constant drum beat of doom marketing:
- "our product is too dangerous to release but we can't be bothered to prove its capabilities working in public hacking competitions"
- "our product is going to kill everyone"
- "our product is going to take all the jobs"
- "we have a $40T addressable market"
- "in a few days AI will be able to improve itself without human intervention and it's capabilities will hocky stick to infinity!!!"
Followed by absurd financials that spin massive losses as "getting in on the ground floor" before historic profits arrive based on the doom marketing above.
No one is saying AI is going away soon). But OpenAI and Anthro will go the way of Netscape when the market finally stops blindly accepting the doom marketing. Anyone with eyes can see LLMs will create historic increase in productivity among knowledge workers AND it will be a commodity. The massive profits frontier labs need to justify valuations are not coming.
There are AI bears and AI bulls. It's easy to cherry pick extreme and clearly wrong statements from each. But if you actually believe the bears are the more extreme/wrong overall you just aren't paying attention to what the bulls are saying.
At some level this all just comes off as post hoc justification for a really bad cortisol addiction.
Why are we keeping score in a game with completely arbitrary rules? The polarity is the hallmark sign for me of someone who enjoys a ride that certain neurotransmitter. I used to commute to and from work 2 hours every day. I know what it's like to be addicted to this stuff.
In other contexts people would ask me not to cherry pick extreme statements like “OpenAI and Anthropic will go away”. So I don’t have to cherry pick. I just have to pick what you said.
> No no no, don’t burst that AI bubble just yet. I haven’t finished all my side-projects.
You'll be fine; the GPUs will be sold off for pennies on the dollar, and if you can't run one at home there are plenty of people who will buy them to host for cost of hosting +5% markup.
Welp that’s not a good sign for the anthropic IPO. Curious what happens now that both OpenAI and Anthropic will face budgetary pressure. I don’t think they can raise prices, as it’d just open ppl to switch to Open source models.
The work going on to improve things on single card like a 3090 is nuts. HyperQwen, other things. I have my subscriptions, but always good to explore options.
You have to understand that Strata and HyperQwen are giving you good looking tokens per second but are not giving you anything close to the bf16 model’s capability (they quantize, worse they quantize KV caches, they approximate expert routing etc.)
The models are so impressive that getting 70-80% of their capability can be helpful, but beware, you are using a significantly dumber model.
Sure, but, in absence of money, where are the open models going to come from? They take a lot of effort and resources to train. The current ones have been made in hope the growth will lead to a payoff one way or another. With the two main giants struggling and the market cooling, that payoff becomes quite uncertain.
Shorting is more dangerous than buying long dated puts. At least with puts, if it's volatile there'll be opportunities to sell out of it if the direction isn't down in the long term.
It's so hard to time these things that short term bets are insanely risky. Yeah, thinks should go down, but they might or might not do it soon, and it might happen overnight because somethingsomething Yen Carry Trade or a surprise in the Middle East or some LatAm crash or an election result or God knows what.
It demonstrates why Anthropic has to IPO ASAP. Private investors are beginning to tap out. Anthropic is selling junior debt over 10% where it was about 8.5% last offer. If Anthropic wants to meet its compute purchase obligations (via actual business), it needs to start tapping public markets ASAP as its position is getting weaker. The size of the float and how much is primary vs secondary sale is the data we're missing right now. If the float is small and from secondary sales, the IPO is an exit and investors would be wise to stay away as Anthropic's runway stays where it is and therefore would require a re-acceleration of revenue growth to survive. If it is large and mostly from primary sales, it is a legit fund raise which extends the runway and revenue growth can be allowed to slow because of the pricing pressure you mentioned.
It's frightening to me that single companies' valuations can vary by that much. The stock exchange is the Adam Smith way of directing the assignation of resources to the most efficient company, and it's supposed to be liquid enough to allow fine-grained decisions.
> The directors with of such [joint-stock] companies, however, being the managers rather of other people's money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own.... Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.
This Adam Smith?
Adam Smith was against Joint Stock Companies (aka: the predecessor to the modern company). Specifically, he believed that shareholders will never watch over the money with the same care as a merchant who watches his own money.
> The stock exchange is the Adam Smith way of directing the assignation of resources to the most efficient company, and it's supposed to be liquid enough to allow fine-grained decisions.
So? OAI isn't on any stock exchange right now. Their value is not determined purely by supply and demand.
Guess they'll just have to tighten the belt and follow through on their promise to revolutionize work, capitalism, government, and everything by building AGI. Lol. Lmao.
How does this affect OpenAI's prospects in the next few quarters?
Unlike Anthropic, OAI does not have an S-1 to pore over. Their finances are shrouded in rumor and speculation. I can't assess how much of a death knell a ~15B financing shortfall is.
Nobody on the outside knows for sure, but two key signals to watch are project sunsets and brain drain.
If the rumors of fundraising difficulties are true, OAI will have to prioritize its most profitable projects, potentially slowing down new training runs and optimizing existing models for efficiency at the expense of user experience.
Insiders are also the first to sense internal trouble, so if top talent starts leaving for competitors preparing to go public, it won't bode well for the company.
If this is being announced here, it was probably started at least a few months ago, and at that point funding was likely looking a lot more forthcoming, so it would make sense to try to raise more than is strictly necessary if the price is good. On that basis, it might not be a problematic shortfall.
The amount itself is probably meaningless. The fact that there was a shortfall at all is, for me, the signal.
Not too long ago, people were fighting to throw money at them. That might be the sign that we're past the peak of inflated expectations and going down towards the through of disillusionment .
> The amount itself is probably meaningless. The fact that there was a shortfall at all is, for me, the signal.
It is a signal, but I am not sure what it is signalling...
It could be signalling that all surplus money has been consumed already (i.e. the investment class has no more money left to invest).
It could signal that the specific class of investment is no longer desirable (i.e. the investment money is there, but has no appetite for token-providers).
It could mean that OpenAI, specifically, is considered not worth committing to anymore.
We should be looking at how the entire class of token providers is doing; if the rest are still getting interest from investors but OAI is not, then it's just OAI that is in trouble. If the entire class is not getting the money they are asking for, then maybe the peak of the bubble is reached (or the surplus money is all invested).
lack of appetite, when broadly visible, removes future speculators from the new investment pool, and starts bleeding old speculators. This will create a downward pressure. As the dynamic plays out the second rung of speculators will bleed out too.
Thats how bubbles burst - as each tranche of speculators bails the next tranche gets spooked through the pricing signals.
I think Microsoft laying off 60,000 people was going to happen regardless of this AI boom or even the economy being in the absolute shitter it's in right now.
When the economy was much stronger in 2018 their headcount was around 131,000 people. By 2020 that jumped to 163,000, and by 2022 it reached 221,000. I have personally heard of employees feeling like they had nothing to do.
With their current head count at around 218,000 employees (I'm excluding their Activision head count here), bringing things back down to 160,000 or so employees sounds a bit more realistic, especially given that Microsoft has not been expanding its range of products significantly. They're building out more in the spaces they're in, but they've been pretty conservative on new product launches compared to others.
MSFT isn't laying off 60k people. It's offering voluntary severance, which will have a sub-10% take-up (for reference at GOOG it was low single digits).
If an open source model locally does one job correctly, lets say writing the code, then what really do we need OpenAI and Claude for? But I guess there might be some time in that.
That’s why the Mac mini and studio are selling like hotcakes. Massive unified memory with massive cpu performance, with a solid hardware. If I had 3-4K burning a hole in my pocket I know what I’d be getting.
What depreciation? I bought a DGX Spark a month ago for Qwen Flash Next (excellent model, by the way - using it basically exclusively at this point). The hardware has gone up in value 55% since I bought it. I just wish I had bought two of them.
I'll similarly ask, what depreciation? Hardware is going up in value, not down, and even if it did depreciate faster, people are optimizing models for older hardware so that again they retain more value for token generation.
The problem with AI is that, this time, nobody was caught off guard. From small startups to tech giants, everyone bet heavily on it. There are very good open-weight Chinese models, and even a French miracle. There is no winner-take-all.
So models are already a commodity, and will remain one for years. Companies must balance capex with very long payback periods against strict austerity everywhere else.
> From first principles I think youre right, but also Anthropic is making something like 80% margins.
I'm skeptical that they are operating at anything but a loss. 80% margins on a specific product (API) might still not cover the losses on the other products (Free tier, subscriptions) and their expenses (operating costs, training, research, etc).
I’m not touching any of that stock, most likely ever.
There’s so much money that has been poured into this, with absolutely no revenue to justify it. Trillions of investments generating billions of losses.
Now they’re looking for retail and retirement funds to pay off the debt.
This is not to say that no one will make a profit; I’m sure some people are _very_ happy.
This is really fascinating, I'm thinking of putting a significant chunk of my net worth into the four AI labs (maybe 40/30/20/10% across Anthropic/OpenAI/Google/Meta, alongside another large investment across the chip supply chain).
It seems obvious to me that we will get superintelligence in the next 5 years, and that is a winner take all race.
There is nothing to indicate that they will achieve general intelligence. Their models have stagnated and are incapable of continuous learning, so the architecture is a dead end.
The mistake is assuming that science is linear. You could give me a trillion dollars, there’s still no guarantee I’ll invent cold fusion. You can’t predict or guarantee inventions.
I don’t believe in betting on single companies but I’d be more inclined to bet on Amazon and Google. Most AI deployments go through bedrock, and Google has their own cloud business and other businesses to make money. That means they can win regardless of who develops the next cool model.
Interesting, the current gen of models feels quite close to AGI to me. If you showed it to me 5 years ago and told me nothing about how it works, I'd probably have called it AGI.
it’s kinda crazy but i do think we’re seeing a turn
my company was easily spending $1m/month on tokens (hit 1.2m september)
sonnet 5.5 drops - we barely cracked $600k this month
it has to go down too, carbon is interesting, china has qwen 4 soon
coding isn’t sustainable growth - RLRVF is really effective for software development - labs are cracking the code, these models will have to get better at other things to be worth it
haiku maybe a little, i don’t think it had much usage, my company there aren’t many power users, they use the default which is sonnet 5.5 on medium with autocompact at 300k
most people probably still by hand or using it to review code usually
most of the spending was actually coming from a minority of power users
> Why do I sense a schadenfreude here? It's like people are rooting for their failure.
You sound surprised. Why?
After all, they have been selling their product on the basis of driving the value of human labour as close to zero as possible (your labour included). Why wouldn't people want such an endeavour to fail?
Among other reasons, because it's been evident that the numbers won't add up from the beginning. It's always delicious when reality catches on a major scam.
They're trying to enclose all of human knowledge so they can sell it back to us, all while displacing human labor and centralizing control of the economy.
They're telling us human endeavors are no longer needed if they succeeded, they also warn us that they might accidentally cause the end of the world in the process.
LLMs not needed for programming or software engineering, and overall harmful in many dimensions. I look forward to the hype bubble popping and the AI industry collapsing.
Hopefully more of humanity's clearly vast amounts of discretionary wealth liquidity can be re-directed to better areas like health/medical, carbon crisis climate mitigation, clean/renewable energy, democracy defense and truly useful common infrastructure for society.
I think a lot of companies are struggling to move beyond this being a thing developers use to something everyone can use. Developers have to go really far out of their way to build agents and tools that apply the capabilities to their specific business. Someone in accounting cannot simply fire up chatgpt.com or copilot and use it in the same way a developer can. There is no instruction manual or historical precedent for how to do this. Very few people are currently in the right situation to make this work.
My observation is that most development teams are still in panic / survival mode, spending all day stacking sandbags instead of bringing these capabilities to the broader team. The fear of job loss in this particular market is crippling. No one will admit it publicly but you can feel the adversity on every AI status call. I've managed to convince a few that AI won't take their jobs, and these people have become indispensable at enabling deployment of AI beyond the weird nerd part of the org chart.
I think Steve Jobs' quote sums this up beautifully:
"This is a field where one does not write a Principia which holds up for 200 years. This is not a field where one paints a painting that'll be looked at for centuries, or builds a church that will be admired and looked at in astonishment for centuries.
No, this is a field where one does one's work and in 10 years it's obsolete..."
And it's even harsher for AI where we're witnessing the release of a new model every hour these days
From what I can find, the
previous round was in March at 852B. Not being able to raise at 1.4T a mere 7 months later isn't so big a problem the reporting around this makes it out to be...
Look. Some say AI improves speed. It might also improve quality - if you use it as a tool, with a full understanding of what's happening in your system and preserved ability to maintain that system even if AI disappears one day for whatever reason. But since all the competitors are jumping into AI, most won't focus on quality, but on delivering speed, since you have to be competitive and justify AI use, right? So if AI doesn't improve relative speed, and in many cases doesn't improve quality, then why is it there? The possible answer is: to consolidate the means of production under one's own control. With robots involved here, humanity might be forced into an anti-utopia - versus AI communism.
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[ 2.9 ms ] story [ 62.5 ms ] threadAny tiny news article that indicates even a modicum of challenges for OpenAI will be met with slurry of such comments.
Perhaps it’s good to keep a good epistemic hygiene in all this. OpenAI isn’t going away anywhere soon. AI isn’t going away, in fact we haven’t even started yet.
- "our product is too dangerous to release but we can't be bothered to prove its capabilities working in public hacking competitions" - "our product is going to kill everyone" - "our product is going to take all the jobs" - "we have a $40T addressable market" - "in a few days AI will be able to improve itself without human intervention and it's capabilities will hocky stick to infinity!!!"
Followed by absurd financials that spin massive losses as "getting in on the ground floor" before historic profits arrive based on the doom marketing above.
No one is saying AI is going away soon). But OpenAI and Anthro will go the way of Netscape when the market finally stops blindly accepting the doom marketing. Anyone with eyes can see LLMs will create historic increase in productivity among knowledge workers AND it will be a commodity. The massive profits frontier labs need to justify valuations are not coming.
There are AI bears and AI bulls. It's easy to cherry pick extreme and clearly wrong statements from each. But if you actually believe the bears are the more extreme/wrong overall you just aren't paying attention to what the bulls are saying.
Why are we keeping score in a game with completely arbitrary rules? The polarity is the hallmark sign for me of someone who enjoys a ride that certain neurotransmitter. I used to commute to and from work 2 hours every day. I know what it's like to be addicted to this stuff.
You'll be fine; the GPUs will be sold off for pennies on the dollar, and if you can't run one at home there are plenty of people who will buy them to host for cost of hosting +5% markup.
The models are so impressive that getting 70-80% of their capability can be helpful, but beware, you are using a significantly dumber model.
Here’s one example https://allenai.org/olmo
Short the stock at the first available opportunity --- if there is an opportunity.
It's so hard to time these things that short term bets are insanely risky. Yeah, thinks should go down, but they might or might not do it soon, and it might happen overnight because somethingsomething Yen Carry Trade or a surprise in the Middle East or some LatAm crash or an election result or God knows what.
Personally, I just buy inverse ETFs that target specific stocks.
The more people see AI is still just software (albeit a different kind), the more they will remember to instead start with where/how it works.
> The ChatGPT maker’s latest funding round values it at $1.25 trillion, less than its $1.4 trillion target
This Adam Smith?
Adam Smith was against Joint Stock Companies (aka: the predecessor to the modern company). Specifically, he believed that shareholders will never watch over the money with the same care as a merchant who watches his own money.
So? OAI isn't on any stock exchange right now. Their value is not determined purely by supply and demand.
Number go down, or even not go up as much as expected, is not good. These valuations are entirely matters of confidence. When that goes away…
Number might go down more. Number might go up more. Number might even be a better buy today than yesterday, or number may be far worse.
1.25 is still a number. It hasn't burst.
My only request is to keep Opus 5.5 alive
No. It’s actual models from Apple, trained from gemini outputs, which is not the same as reselling gemini.
Is knowing that and pointing it out particularly clever? I wouldn't have thought so.
true
> but rather other assets and value they hold.
true
> [anthropic has assets which are valuable to apple]
does not follow
> There is absolutely no timeline where Apple acquires any token provider because Apple doesn't sell tokens.
Apple not "selling tokens" doesn't preclude them from purchasing a company that does.
You can delete your comments, IDC. But I'm no longer responding to you so your dick will be left swinging in the breeze for all to see.
Those two are very different cults. Cultures, I mean.
Unlike Anthropic, OAI does not have an S-1 to pore over. Their finances are shrouded in rumor and speculation. I can't assess how much of a death knell a ~15B financing shortfall is.
If the rumors of fundraising difficulties are true, OAI will have to prioritize its most profitable projects, potentially slowing down new training runs and optimizing existing models for efficiency at the expense of user experience.
Insiders are also the first to sense internal trouble, so if top talent starts leaving for competitors preparing to go public, it won't bode well for the company.
Not too long ago, people were fighting to throw money at them. That might be the sign that we're past the peak of inflated expectations and going down towards the through of disillusionment .
It is a signal, but I am not sure what it is signalling...
It could be signalling that all surplus money has been consumed already (i.e. the investment class has no more money left to invest).
It could signal that the specific class of investment is no longer desirable (i.e. the investment money is there, but has no appetite for token-providers).
It could mean that OpenAI, specifically, is considered not worth committing to anymore.
We should be looking at how the entire class of token providers is doing; if the rest are still getting interest from investors but OAI is not, then it's just OAI that is in trouble. If the entire class is not getting the money they are asking for, then maybe the peak of the bubble is reached (or the surplus money is all invested).
Thats how bubbles burst - as each tranche of speculators bails the next tranche gets spooked through the pricing signals.
If you have a billion users and 90% + are freeloaders, you need social media style ads to support growth, which no one likes.
Plus they are all out of data training sets, they are buying zombie companies for their data.
There are dozens of distillated clones, which are getting better every release.
The only moat is expensive data centre builds with on-loan Nvidia inference and the Chinese embargo fears.
Good luck out there.
When the economy was much stronger in 2018 their headcount was around 131,000 people. By 2020 that jumped to 163,000, and by 2022 it reached 221,000. I have personally heard of employees feeling like they had nothing to do.
With their current head count at around 218,000 employees (I'm excluding their Activision head count here), bringing things back down to 160,000 or so employees sounds a bit more realistic, especially given that Microsoft has not been expanding its range of products significantly. They're building out more in the spaces they're in, but they've been pretty conservative on new product launches compared to others.
Also spinning hdds… insane amounts of appreciation.
So models are already a commodity, and will remain one for years. Companies must balance capex with very long payback periods against strict austerity everywhere else.
Good news for customers, BTW.
I'm skeptical that they are operating at anything but a loss. 80% margins on a specific product (API) might still not cover the losses on the other products (Free tier, subscriptions) and their expenses (operating costs, training, research, etc).
They have a lot of cash, but very few assets and a voracious hunger for renting compute.
Don't get me wrong, they make a fantastic model, but the business success is yet to be seen.
Where did you read this? I though it was a confidential filing (but I am open to receiving links to the S-1 that was filed).
All the more reasons for us to figure out how to keep getting open models, or we are subject to the will of the the few frontier labs.
as a litmus test: would you turn down the opportunity to buy OpenAI shares at this current valuation?
There’s so much money that has been poured into this, with absolutely no revenue to justify it. Trillions of investments generating billions of losses.
Now they’re looking for retail and retirement funds to pay off the debt.
This is not to say that no one will make a profit; I’m sure some people are _very_ happy.
It seems obvious to me that we will get superintelligence in the next 5 years, and that is a winner take all race.
The mistake is assuming that science is linear. You could give me a trillion dollars, there’s still no guarantee I’ll invent cold fusion. You can’t predict or guarantee inventions.
I don’t believe in betting on single companies but I’d be more inclined to bet on Amazon and Google. Most AI deployments go through bedrock, and Google has their own cloud business and other businesses to make money. That means they can win regardless of who develops the next cool model.
1.25T? Yes.
Open models exist, and are extremely capable. OpenAI will never achieve a decent ROI when that is true.
If either of AI companies "solves software" (does not look improbable rn) ahead of all others, that would defend ~3T valuation right away.
And that's just software.
2) Even if does, Chinese open models are very close in capabilities.
my company was easily spending $1m/month on tokens (hit 1.2m september)
sonnet 5.5 drops - we barely cracked $600k this month
it has to go down too, carbon is interesting, china has qwen 4 soon
coding isn’t sustainable growth - RLRVF is really effective for software development - labs are cracking the code, these models will have to get better at other things to be worth it
It’s not clear whether people are being more careful, or if the price per effort is in free fall.
At work I am stuck with Claude, but I was always mindful of the cost of that thing.
With aggressive clean session management and some judicious compacting, I get Opus to plan, Haiku to code, Sonnet to review.
I managed to reduce costs from ~$200 to ~$50 in a month, even when I started to use Claude for more tasks than I did before.
most people probably still by hand or using it to review code usually
most of the spending was actually coming from a minority of power users
You sound surprised. Why?
After all, they have been selling their product on the basis of driving the value of human labour as close to zero as possible (your labour included). Why wouldn't people want such an endeavour to fail?
Tech and automation exists to drive the marginal cost of labor toward zero. It's just happening faster now.
> (your labour included)
Right, it's disrupting you now instead of just dumb people.
Other tech was developed as a productivity boost, and for jobs it may have displaced, it ultimately created more.
The ordeal feels like 2yo who hasn't learned yet that the pee will come no matter if he wishes to play or not.
And we already know what choices will be made.
I can't really make sense of this sentiment, because I don't really understand what it is you mean by "overtake".
Do you expect AI to replace human's who think for a living?
They're telling us human endeavors are no longer needed if they succeeded, they also warn us that they might accidentally cause the end of the world in the process.
Why shouldn't we root for their failure?
Hopefully more of humanity's clearly vast amounts of discretionary wealth liquidity can be re-directed to better areas like health/medical, carbon crisis climate mitigation, clean/renewable energy, democracy defense and truly useful common infrastructure for society.
My observation is that most development teams are still in panic / survival mode, spending all day stacking sandbags instead of bringing these capabilities to the broader team. The fear of job loss in this particular market is crippling. No one will admit it publicly but you can feel the adversity on every AI status call. I've managed to convince a few that AI won't take their jobs, and these people have become indispensable at enabling deployment of AI beyond the weird nerd part of the org chart.
"This is a field where one does not write a Principia which holds up for 200 years. This is not a field where one paints a painting that'll be looked at for centuries, or builds a church that will be admired and looked at in astonishment for centuries.
No, this is a field where one does one's work and in 10 years it's obsolete..."
And it's even harsher for AI where we're witnessing the release of a new model every hour these days
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