alt Hacker NewsYou’re trying to apply value based pricing (infinite margin upside) to a commodity.
Pre-bubble pricing: $1400 gets a 128GiB iGPU optimized for inference. Glm and kimi need 800-1000GiB. Call it 1TiB. The $1400 boxes could be ganged into sets of 4-8, with a switch. Call the switch $1000.
Each box has a TDP of 250W. 8 x 250/120V = 16.666A, or one household circuit in the US, so no new power infrastructure is needed.
$1400 x 8+1000=$12,200. Assuming standard five year depreciation, that’s $2440 a year. There are a billion knowledge workers alive today. So that’s $2.4T annual revenue. Average net profit margins on computer hardware are 4.3%. That works out to $105B net income, globally.
So, I guess the question is whether the (currently #2) open weight models provide $1.4-2.4T less value per year than the #1 and #3 models, and, if so, if customers can measure this, or are willing to spend 2x more and deal with censorship, data theft, intentional enshitification, sabotage, ads, product placement, etc, to get the slightly “better” model.
Also, note that my numbers assume moore’s law stopped for all time in 2024, but we’ve seen HW improvements since then.
Right, that number is more of an estimate of the value proposition of the entire AI industry rather than projections of revenue or valuations... it's essentially an estimate on how much the market could theoretically bear. Whether the companies can capture that value is, to your point, rightly a different question.
I do think open weight and other competitor models, especially with better harnesses, will play a significant role in the equation and will result in less concentration in the market. However, I do also think the big AI companies will capture a lot of that value. Partially for the same reasons that the cloud industry has been growing like gangbusters, even pre-AI, despite on-prem being much cheaper: companies will outsource anything that is not deemed a "core competency" for their business.
A lot of the problems you mentioned will be relegated to the consumer market and won't apply to enterprise contracts -- which is where the real money is.