The AI profit margins are negative or slim at the moment, unless you are providing the chips and infrastructure.
And even if OpenAI, Grok, and Anthropic decide to act as a cartel and all raise token prices together ... China 🇨🇳 is still providing good AI models which are cheaper.
The one caveat is that margins could improve temporarily if the existing restrictions on advanced Western AI hardware provoke the Chinese government into imposing retaliatory restrictions on their own efficient AI models leading to a hard divide between the two ecosystems. Whether that leads to higher revenues and profits is debatable, though. If customers can't generate an attractive ROI, demand eventually falls off—especially given how precariously the Consumer is poised.
The AI profit margins are negative or slim at the moment, unless you are providing the chips and infrastructure.
And even if OpenAI, Grok, and Anthropic decide to act as a cartel and all raise token prices together ... China 🇨🇳 is still providing good AI models which are cheaper.
Absolutely true.
The one caveat is that margins could improve temporarily if the existing restrictions on advanced Western AI hardware provoke the Chinese government into imposing retaliatory restrictions on their own efficient AI models leading to a hard divide between the two ecosystems. Whether that leads to higher revenues and profits is debatable, though. If customers can't generate an attractive ROI, demand eventually falls off—especially given how precariously the Consumer is poised.
https://simhamakaran.substack.com/p/back-to-the-future-part-i-the-economic?r=l2fn0&utm_campaign=post-expanded-share&utm_medium=web