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points by chakintosh 4 days ago | 0 comments

It’s a race to the bottom to see who blinks first and goes bankrupt. It’s not sustainable.

Is it? DeepSeek has already proved they’re selling inference at a profit.

DeepSeek hasn't proven anything except what they say. You're inherently trusting a company's statements over others. When an independent third party corroborates the numbers then we know for sure. Until then, every company is just selling a story for investors and users.

[–] killingtime74 4 days ago

DeepSeek has released their weights so multiple companies can tell you if they're profitable, whereas the ones with closed weights, you will never know, even if they go public, they dont have to publish the actual margin.

[–] epolanski 4 days ago

I'm not aware of Chinese law, but I suspect that lying to the public or investors carries risks.

[–] Gareth321 4 days ago

As a now former Chinese investor, the numbers reported in China are almost entirely fictional. They are whatever the local prefect or senior leaders wants them to be. Right now they seek to imply to the West that they are competitive, so the numbers reported reflect that. Almost no Chinese company permits independent audit of any of their finances.

It’s a rabbit hole but if you have some time it’s fascinating to look into the sentiment of investing in China vs the rest of the world. Because the numbers are so unreliable, investing is considered about the same as gambling in China. You’re more likely to lose a lot of money than win, and there is no way to accurately predict strong from weak companies based on their reported financials. Occasionally senior leaders will sentence the leader of very large failed company to death to attempt to maintain confidence, but it’s not working. This is one of the reasons for the housing bubble. There just aren’t stable investing opportunities in China.

[–] pixelstack 4 days ago

> As a now former Chinese investor, the numbers reported in China are almost entirely fictional.

where they not? Pick any corporate in the world and you will find bunch of made up numbers just to make stock value go up

[–] Gareth321 3 days ago

Most publicly listed companies in the West require independent audits. Those audits are published for everyone to read. The listed company and the auditors are all tightly regulated, and while fraud can happen, it's relatively rare.

I think you're making the mistake of thinking that because fraud occasionally happens in the West, it's on anywhere close to the same scale as China. If Chinese companies were capable of passing independent audits, they'd all be publishing independent audits. That would be a massive confidence booster in China and internationally, and stock prices would rise significantly. They don't, because they wouldn't pass.

[–] Danox 3 days ago

Fictional to who? After the Evergrande Group or Jack Ma I would imagine not to the Chinese government anymore outside China maybe a little.

[–] ares623 4 days ago

The people running AI companies are famous for being risk averse

[–] crossroadsguy 4 days ago

While I disagree with PC's insinuation, but in China there's just one thing that carries legal/fatal/etc risk for a large company and lying to public or investors isn't that.

[–] Danox 3 days ago

After China Evergrande Group misleading the Chinese government would be life altering.

[–] bakugo 4 days ago

Does DeepSeek offer a heavily subsidized subscription that provides 20x+ more usage than the equivalent value in API tokens?

API usage being profitable is completely plausible, but almost nobody pays API prices for Claude and GPT, nor would they be able to afford them if the subscription suddenly stopped existing.

[–] vitaflo 4 days ago

If you're actually asking the question and not being sarcastic, no, Deepseek does not offer subscriptions at all, subsidized or otherwise. You only can use them at the API rates.

[–] unchar1 4 days ago

I doubt that's true for enterprise.

In both places I've worked at in the past two years (F500), subscription plans were banned due to data privacy concerns. Everyone _had_ to use the provisioned API tokens (even if they had a personal subscription)

[–] trollbridge 4 days ago

Nope, they don't.

Other providers also charge similar prices (who are obviously not subsidising anything) for running DeepSeek models on their own infrastructure.

OpenCode Go sort of provides a "subscription" which will let you use DeepSeek but they're extremely transparent about what they're offering.

[–] holoduke 4 days ago

Not DeepSeek themselves, but their open models are run by third-party companies in a profitable way. The unsustainable interference theory has been debunked.

[–] written-beyond 4 days ago

Define profit? If by profit you mean covering compute costs then yes you're correct. If by profit you mean covering spent RnD budget and future RnD budget allocations then no, by no means are any of these AI companies running at a profit.

Also these third-party providers are running magnitude smaller models than what Anthropic and OpenAI's power users expect from them. Yes the average chat message isn't being routed to the 1+ Trillion param model but people running CC or Codex on Ultra probably are. Those are objectively more expensive.

[–] chrisXOXO 4 days ago

I am citing out of my head here, but think deepseek’s inference engine with their models create around 30 dollars per hours while it costs around 4 dollars, there might be other costs but if you look at the demand, it will become very profitable. I don’t understand why people are pessimistic about the profitability (I don’t want them to be this successful either). BUT why would they care about profitability right now. They believe in AGI, so do the big money people. They get their investments. This train is not stopping and I believe their predictions are correct (IMO we should not debate about timescales apart from spreading urgency). And for the lowering of prices, it is possible because they just can and hooking people now into their systems will be 10x more profitable in the future. In addition to all the juicy training data they get with real world clients. They are scared the others win, they are not scared that they run out of money.

[–] mike_hearn 4 days ago

People are pessimistic about profitability because it's basic economics. Pricing power comes from advantage and nothing else. In particular it doesn't come from demand because in a well functioning market supply will rapidly increase to meet demand.

The little companies inferencing DeepSeek have no advantage over any other company doing the same thing. Therefore, their margins should look like any competitive industry. Farming, supermarkets, airlines are my go-to example. Usually margins in the 3% to 5% range. Profit margin average across all industry including very profitable ones like tech or oil is only 10%.

The companies offering inferencing and nothing else are relying on subsidies by the open weight model providers. If those companies all stopped releasing open weights tomorrow the offerings on OpenRouter would see rapid traffic declines as the knowledge in the weights became stale and as other companies that invested in proprietary R&D overtake them. So being profitable on inferencing open weights is a very short term play, and there's no reason to think it's a great business in the long run.

[–] written-beyond 4 days ago

I got our pocket god ChatGPT to fact check this discussion. No lab is profitable, it is a moonshot to expect they'll ever recover the billions frontier labs have put in behind these DCs. I never understand this argument everyone tries to make, AI is too expensive -> It will get cheaper as they scale -> AI is too cheap and not sustainable -> No it's very profitable on API -> go back to 1.

I am not an AI denier, I use it and I find it very useful. That said I can disagree with the current economics of the industry and their business model.

[–] eeedda 4 days ago

Inference economics only work for those who build on top of the models lol. It should be said that Anthropic and OpenAI suck at product development too - claude for finance, Sora, OpenAI web browser - wtf?

Its difficult for people to accept this because many want the model producers to succeed badly.

SOrry folks...

[–] ml-anon 3 days ago

you're citing out of something. not your head.

[–] chrisXOXO 3 days ago

Touché

[–] Art9681 4 days ago

They are selling inference at severely gimped capability. Even in openrouter the quality and speed of the model being served varies by provider. When you dig into the details (which most people don't do), not all providers are equal.

[–] qznc 3 days ago

Are they profitable if you include R&D though? In other words, they also have to pay for training.

[–] ml-anon 3 days ago

lol. no

[–] krainboltgreene 4 days ago

The conditions for DeepSeek's profitability are very very narrow. A key piece being that they have cheap energy, a second key is that they have west/east clients and thus extremely high uptime.

[–] trollbridge 4 days ago

Energy costs (and almost everything else) are a minimal part of providing inference.

Most of the cost is depreciation on the GPUs and the HBM.

The one number you need to figure out is how much it costs you to buy that GPU and HBM, then how many tokens you can sell from it over its lifespan which is generally amortised over 2 years.

[–] ipsum2 4 days ago

This is not correct. Their margins are extremely high, (~1000%), and none of the factors you listed would cause them to have negative margins.

[–] Valakas_ 4 days ago

Maybe Sam Altman is like robin hood. Taking from the rich (investors) to give to the poor (everyone else). The poor win by having cheap models (chinese) which were probably trained on data from ChatGPT et al. Of course he can't say this out loud or he wouldn't get any money from investors. In the end, if OpenAI goes bankrupt who else besides the investors lose money? Who benefits?

[–] morgoo 4 days ago

Are you interested in buying a bridge? I'll do you a good deal!

[–] iLoveOncall 4 days ago

Except Scam Altman has stolen from literally everyone to train his models.