AI vs. software companies

[Spekulatius]

I did a few queries in Gemini about  gross margins for OpenAI and Anthropic and the answer is that it about 40% and may right answer is 42 . Thats pretty low and the reason is that unlike traditional software, their service is expensive to provide because of the compute cost for tokens. This may go up over time but it’s not a certainty  because competition may eat into margins. So in any case, these companies will be valued lower than software cos (which can easily exceed 80% gross margins).

 

My guess is that business models will have some attributes similar to chemical processors because in the end they process energy via silicon into tokens that get consumed with by their customers. So besides model quality which determines the value of the tokens, the cost to produce these tokens is of immense importance which is likely why OpenAI gets into producing their own chips.

Edited Saturday at 09:52 PM by Spekulatius

[whatstheofficerproblem]

https://a16z.com/the-cost-of-cloud-a-trillion-dollar-paradox/

 

LOL.

[whatstheofficerproblem]

On 5/29/2026 at 3:12 AM, backtothebeach said:

Lol. There is no real intelligence in LLMs.

 

Perplexity has learned from this prompt being posted on social networks and gets it right: 

 

"Drive there. The car needs to be physically at the car wash to get cleaned, so walking would leave it at home. ..."

 

ChatGPT however:

 

"If it’s only 100 meters and the weather’s nice, walking is probably the better move. It’ll take about 1–2 minutes on foot, you avoid the hassle of starting the car just to move it a very short distance, and you get a bit of fresh air in the sun."

 

Excellent point. Should also note the inference/API costs which the AI bulls say are coming down 1000x are not really calculated costs. It's cost to reach a benchmark. These benchmarks have been public for a long time now and it's very easy to train future models or existing models to optimize for the bench. Like the folks on Shitter say, "benchmaxxing". So inference/token costs coming down is an illusion.

Edited 2 hours ago by whatstheofficerproblem

[treasurehunt]

1 hour ago, whatstheofficerproblem said:

https://a16z.com/the-cost-of-cloud-a-trillion-dollar-paradox/

 

LOL.

 

This article was published over 5 years ago. Surely that's enough time for companies to move workloads off the cloud en masse if that is beneficial, right? The article concludes thus: "either the public clouds will start to give up margin, or, they’ll start to give up workloads". Has either of these things happened?

 

Or are you making some other point that I missed?