It's exactly this. Not only this, we might be running very soon into cheap compute soon given the current CAPEX of all hyperscalers.
DeepSeek is model that you can run anywhere, meaning that any datacenter/company could run it at a price that would give them a margin taking in account running costs of the datacenter + depreciation.
I'm very sure we're overbuilding capacity, and we'll find out around 2027.
Those open weights will become extremely attractive because all that datacenter extra capacity laying idle will be possible to be used by builders.
It may be the case that in 2027-2028 will be cheaper to start a new AI model company from scratch to compete with Anthropic/OpenAI as you'll be able to:
- the new company won't be tied to so much capital, debt and running costs
- get much cheaper datacenters to train than it is Today, as the big labs will be stuck with bad infra contracts
- have great engineers/researchers willing to jump ship because if Anthropic/OpenAI valuation falls, that will destroy their equity
- wide available chinese models to distill from, papers and ideas on how to acquire datasets
Anthropic/OpenAI are playing an extremely risky game, they need to greatly keep doubling their bets and delivering model big performance increments.
If they don't give us ASI/AGI in 2 years or find huge new markets, there's no way the economics will make sense.
The execs forgot why AI models even exist (like huge usage for the cyber models, or new types of models)...
AI models' usage is mostly tied to build Software Today, that's where the value really lies now.
If there isn't enough Software to be built as people claim to the rate they expect, eventually the supply of AI models will outstrip the demand.
You can't sell pick & shovels infinitely, AI models themselves are also in that category.
Eventually you need enough holes to be dug, and gold to be struck, and nobody knows what's that demand. (even though they built all that supply...)
thiago_fm
It’s interesting to watch what’s happening in the AI market right now. On one hand, low API prices help attract users quickly but on the other hand, running these models is extremely expensive and companies still need to find a way to cover their compute costs... The announcement about future price increases also looks like a classic marketing move, of course.
I don’t know, I’m just really curious what this whole market will look like in five years or so
tehnoslow
Within a year or two when "good enough" models collide with personal hardware capable of running said models, it all inevitably collapses (and Apple stands on top of the pile of rubble with a construction hat on labeled: "told ya so").
awacs
Let's see what it is. They said "significantly" not "tremendously". Doubling the price would be significant, still, it would be very affordable. Let's see!
vcryan
There’s not going to be much of a price difference from Luna (Luna might be a bit cheaper too)
And Luna has actually been my favorite coding model that predictably just works at boring dev tasks.
softwaredoug
They haven't revealed what they are changing in the price, but it's probably cache hit prices. They subsidized theirs to 10x less than normal to drive adoption. That's almost certainly below the cost of electricity for them.
Chinese model providers are in a bind because charging a reasonable margin will put them in competition with all the neoclouds that host their model weights without the development cost. Their economics are far more challenging than OpenAI/Anthropic/Google, who already have thriving high revenue business and mountains of compute online or coming online.
samuelknight
i couldn't even finish celebrate processing 54 million tokens for just $0.49 and they dropped this bomb
real-zephex
Pricing power is kind of interesting in this situation. The human programmer is utterly dependent atm and will be come more so over time because the programming muscles are headed to near zero level of conditioning. We simply cannot not pay the asking price. The only other phenomenon that can break this phenomenon is the commodification of LLMs and GPU compute. It's really just an unprecedented time.
senor_digimon
brilliant marketing? how exactly? more like how to undo any goodwill you've built with your customers.
the only competitive edge for someone like me who wants an api to call is price
willsmith72
So it’s less a price hike and more a 90-day all-you-can-eat buffet before the menu gets reprinted. Clever. Slightly evil. Very AI-industry.
comments (10)
DeepSeek is model that you can run anywhere, meaning that any datacenter/company could run it at a price that would give them a margin taking in account running costs of the datacenter + depreciation.
I'm very sure we're overbuilding capacity, and we'll find out around 2027.
Those open weights will become extremely attractive because all that datacenter extra capacity laying idle will be possible to be used by builders.
It may be the case that in 2027-2028 will be cheaper to start a new AI model company from scratch to compete with Anthropic/OpenAI as you'll be able to:
- the new company won't be tied to so much capital, debt and running costs
- get much cheaper datacenters to train than it is Today, as the big labs will be stuck with bad infra contracts
- have great engineers/researchers willing to jump ship because if Anthropic/OpenAI valuation falls, that will destroy their equity
- wide available chinese models to distill from, papers and ideas on how to acquire datasets
Anthropic/OpenAI are playing an extremely risky game, they need to greatly keep doubling their bets and delivering model big performance increments.
If they don't give us ASI/AGI in 2 years or find huge new markets, there's no way the economics will make sense.
The execs forgot why AI models even exist (like huge usage for the cyber models, or new types of models)...
AI models' usage is mostly tied to build Software Today, that's where the value really lies now.
If there isn't enough Software to be built as people claim to the rate they expect, eventually the supply of AI models will outstrip the demand.
You can't sell pick & shovels infinitely, AI models themselves are also in that category.
Eventually you need enough holes to be dug, and gold to be struck, and nobody knows what's that demand. (even though they built all that supply...)
thiago_fm
tehnoslow
awacs
vcryan
And Luna has actually been my favorite coding model that predictably just works at boring dev tasks.
softwaredoug
Chinese model providers are in a bind because charging a reasonable margin will put them in competition with all the neoclouds that host their model weights without the development cost. Their economics are far more challenging than OpenAI/Anthropic/Google, who already have thriving high revenue business and mountains of compute online or coming online.
samuelknight
real-zephex
senor_digimon
the only competitive edge for someone like me who wants an api to call is price
willsmith72
Jahnavi_Aleti