Leaked financial docs show OpenAI is losing billions of dollars a year

Gemini is number 3 in this race

= SG&A stands for Selling, General, and Administrative expenses

Anthropic is also likely losing money, right?

If you're building a model that lasts a few months before it's no longer the most current one, and maybe a year before it's completely unusable by anybody, then that should just be COGS.

Doing that, however, would betray the real problem with this business model.

Revenue is still growing faster than costs and gross margins have continued to improve.

The real question is when they can start spending less on R&D and still compete.

Do we know how bad/good misAnthropic is doing financially?

There's always working on improving the cost of inference, but I don't think this is an area of R&D that will slow down. The reason is:

1. A better competitor model risks eating away at how much they can charge for inference (i.e. revenue) 2. Whoever unlocks AGI will unlock even more growth 3. Even when you unlock AGI, you'll want to throw gobs of money at it to improve itself and all sorts of things.

> If Fable comes out and demands 50x the price of DeepSeek in order for Anthropic to make a profit on it, how much more productive would I be compared to my personal experience + DeepSeek? 3x? 50x?

You're pricing it wrong and looking at it wrong. First, the per token price doesn't consider that a smarter model can end up using fewer tokens overall to achieve a result. Secondly, if the difference is between failing to accomplish the task and accomplishing the task, suddenly that 50x can seem like a bargain.

> Is it cost effective for a business to hire someone without SWE experience + Fable verses hiring someone with SWE experience and DeepSeek? When does R&D hit diminishing returns?

At this time, someone without SWE experience + <name AI model> vs someone good with SWE experience and <name another AI model> is a no-brainer. The AI model is an accelerant but the "no SWE experience" will be accelerated into a wall. Now maybe that doesn't matter for prototyping and certain other things, but anything in production the lack of experience will hurt them with things they won't even know about or even know how to look for it (e.g. slow, insecure, etc).

If you're in the US and you're making 100k a year, that's worth 5k or $416/m. So you can buy two of the most expensive plans on the frontier models.

This focus on cost optimization is insane. Just use the frontier models. Even a marginal bump is worth whatever the hell they're charging, at least for now.

Deepseek shines for personal usage because it's possible to use it however you want and whenever you want with no session/weekly limits stress because you use the API and it's priced very reasonably.

I think the third coming out Jesus Christ in closer than AGI. Seriously, I dread how much of Silicon Valley is wrapped in this narrative of AGI and Singularity.

How can all these "rationalists" fail to see that this is what religion looks like: Faith and promises of heaven and hell.

There's a non-negligible percentage of the industry who have a pseudo-religious belief in AGI, so I wouldn't be surprised if that was, in fact, the goal.

Who knows, maybe they'll stop once the money dries up.

It's getting businesses to pay $2k/mo or more per professional employee, like a lot of Anthropic customers.

Anthropic is ahead of them there, but that is how they win.

This is how you know ads are inevitable. YouTube is probably a good indicator of how BigLabs will operate for free users.

I think that AI is going to become just another utility people pay to stay relevant. Same as their internet, electricity or gas.

Would love to hear some details on that one...

Or was that a typo and you meant the $200/mo plan instead maybe? That one I could believe, assuming no or frugal subagent use that is.

R&D costs are hurting profit side and while you can cut that one just becomes irrelevant overnight in this space if you do, hence the problem.

If it's not materials, not energy or taxes, not manufacturing, not licensing or rental fees, then I can only think of R&D.

And then the reality turns out not to be the case - you have to continuously spend on R&D to avoid getting your lunch eaten by someone else.

This isn't a social media network with lockin either. People can and will just switch to whatever whenever they feel like it. Maybe it becomes a defacto standard like google but if someone is much better than you, well...

Totally untrue.

The problem is you can't just separate training costs from inference costs. If OpenAI just didn't train a new model for the next five years, sure, they'd do OK. Assuming all those dirt cheap Chinese models nipping at their heels don't make up the gap while OpenAI is resting on their laurels.

Without being a frontier model (read: continuous, incredibly expensive training), they effectively don't have much to sell. So inference and training costs are intertwined to some extent.

And the network effect which ruled for the last 20 years seems to have relaxed its death grip just a bit (of course it is still there as having more customers using your tools and models provides more training data, etc., yet the current network effect doesn't seem to have that high exponential value like before)

Some of my coworkers even use Sonnet (the default in Claude Code for the 20 USD subscription) and see no reason to change even though that model is definitely "outdated" compared to current SOTA.

Anyway: Zero, as of right now.

I fully expect to be able to run useful LLMs on a machine I can justify buying for other reasons. I already can on the secondhand kit I own, and I don’t expect the cost-benefit analysis of local LLMs to ever really get worse.

If I ever need to pay for it, it will likely be to shift some of the capacity into the cloud for either business or pragmatic personal reasons (so I can just carry an iPad etc.)

I fully intend my expenditure to be negligible. Because once one realises that outspending others is impossible, only spending minimisation makes sense.

I foresee it potentially making sense for me to move some mature tools off a local LLM to openrouter, maybe. But probably to the same or similar models.

I spend 30 - 60 bucks a year with Horizon Labs.

I spend 25 bucks a month on Cursor. Cursor replaced an OpenAI sub.

Both support hobby projects. If either cost increased I would spend some time testing local alternatives and probably drop them.

Horizon Labs especially, I know that they have been matched by open models and are mostly a convenience at this point.

AI is so important, I want to have it under my control. Even if I have to pay a penalty in terms of capabilities.

If I were really forced to.

LLMs provide me about the same value as a car does.

When I bought my last GPU, running AI models locally was a consideration though not the only one, and I have it set up but haven't used it much yet. I mostly use the free tiers of ChatGPT or Google to write the occasional script for me. I guess they're going to have to inject a truly unfathomable number of ads to get their money's worth.

I have a feeling my experience is closer to an average persons' than a dev, but it doesn't seem like they'll be able to monetize just from devs even if each one is spending thousands a month.

Maybe it’s just your phrasing but people will only pay for what works, no one is loony enough to support a trillion dollar industry out of the kindness of their heart or spirit of innovation

If AI allows me to cut my time to do something in half on average or allows me to do 2x more it would be worth it to pay up to what my monthly income was before assuming my income scaled with my output.

For work, it depends, but if I have to spend more than a few hundreds bucks probably I'll start looking for alternatives (local models, Chinese providers, ecc)

PS: I'm in Italy, I guess in several parts of the world these figures are even smaller.

It may put me at a disadvantage when it comes to quickly slop something together? But so far the free-to-use chat bots do as well for my needs.

That latest drug for pancreatic cancer? Yeah, all human. After the trillions already spent, AI hasn't come up with any new medications, no new inventions to save lives... Nothing

This is not happening in a vacuum. A lot of index funds and retirement accounts have bought into AI and AI adjacent companies, many with stakes in OpenAI. If OpenAI keels over, even when private, it will affect a lot of americans. If they IPO, it's even worse.

Luckily, we've seen this before. Doom and gloom when smartphones came out. And then the same again when mobile development was preferred and there was an outcry from the web dev crowd and constant downvoting of phone apps.

This is because people here are quietly realizing that they fell for the "token-maxxing" marketing drive which was complete BS for you to gamble more money on tokens as the big AI labs gave heavily subsidized token prices they cannot afford.

Jevon's paradox does not exist at those companies, but it certainly exists at the Chinese AI Labs at Deepseek, Alibaba, z.AI and Xiaomi.

In every way imaginable and then more, looks like beyond the imagination :)

>I don't like these products. I have several negative opinions on them.

You're not alone, and the crowd seems to be building at the same time enthusiasts are proliferating too.

So much widespread negativity I would guess that's about what it's expected to cost to fully overcome resistance and objections. Which must be bigger than we think, they sure have more information than us.