Where's Your Ed At

Generative AI companies are fundamentally unprofitable, with every major player from OpenAI to Anthropic losing billions of dollars annually. The economics are broken: companies like Cursor send 100% of their revenue to model providers, Perplexity spends 164% of revenue on compute costs, and OpenAI lost $5 billion in 2024 despite being the market leader. Inference costs are increasing rather than decreasing, making it impossible for AI startups to achieve profitability even with usage-based pricing models.

Why Everybody Is Losing Money On AI

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In this case it’s better to invest in Cloud provider rather than in AI providers.

Interesting perspective! I think a big reason many are losing money on AI is that businesses underestimate the complexity of implementing it effectively. Without a clear strategy and the right expertise, AI projects can become costly experiments rather than profit drivers. Investing in reliable AI Development Services can help companies avoid common pitfalls by providing structured guidance, proper integration, and scalable solutions that actually deliver value.

It’s interesting how i can agree with pretty much everything he says, but still find his writing too needlessly snarky and obnoxious.

So basically, Deepseek will win in the end…

This really shows a lack of understanding in how startups work and growth strategy. This is par for the course, in this phase where the objective is growth and market penetration not profit. Facebook wasn’t profitable for 5 years for example. Deep market penetration and yes lower cost will turn the tide for the winners that arise. Not all will win but the ones that do will win big.