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Anthropic and OpenAI Have Begun The Subprime AI Crisis
Hello premium customers! Feel free to get in touch at ez@betteroffline.com if you're ever feeling chatty. And if you're not one yet, I'm sorry that I paywalled this, but it took me so much effort and drove me a little insane. Back in September 2024 I wrote about
Back in September 2024 I wrote about a phenomena I call The Subprime AI Crisis — that companies like Anthropic and OpenAI are providing their services at a massive loss, and that at some point they would have to start finding ways to recoup their costs, raising the prices of providing their services, which in turn would cause those connecting to their APIs to have to start doing the same to their customers. In an email shared with me by a source from earlier this year, Microsoft's senior leadership team requested (in a plan that was eventually scrapped) reducing power requirements from multiple areas within the company as a means of freeing up power for GPUs, including moving other services' compute to other countries as a means of freeing up capacity for AI. At some point, the incredible, toxic burn-rate of generative AI is going to catch up with them, which in turn will lead to price increases, or companies releasing new products and features with wildly onerous rates — like the egregious$2-a-conversation rate for Salesforce’s “Agentforce” product — that will make even stalwart enterprise customers with budget to burn unable to justify the expense.What happens when the entire tech industry relies on the success of a kind of software that only loses money, and doesn’t create much value to begin with?
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