Joe

Some home internet routers (e.g… from FritzBox) support multiple VOIP providers, letting you configure rules as to which provider is used for outgoing calls (e.g… default for local calls, and another for international calls). And they provide a normal phone connector.

Just wait until you see how much they waste on unused life insurance!

If you assume they are unprofitable, the Q only becomes whether they are more or less unprofitable by serving the older models for longer.

My caveats were clearly stated… After capital expenditure, it’s just operational costs, where electricity & cooling are the big ones.

At that point, it is insanely profitable to serve. The cheap API prices on open weights models hints at the profit margins involved in the US (the frontier labs and hyperscalers don’t open their books for us), unsurprisingly)

Therefore, the longer they can serve existing and lower cost models at the current rates, the better for their bottom line. It’s just common sense in business.

It doesn’t mean the company as a whole is profitable. I expect we’ll see turmoil in the coming months and years, and the prize will be compute capacity, with electricity & cooling options.

There is also a commercial aspect…

Bigger models are more expensive to train and serve…

Inference is currently insanely profitable if you have the hardware and the automation in place to support and serve it. At that point, it’s a money printing machine, and you want to squeeze as much out of it as you can.

While training new models is extremely expensive, and serving them probably makes less profit (at least initially).

Having an external brake applied to the frontier labs is likely good for their bottom line, while increasing hype and directing customers’ annoyance away from them.

It’s likely only a temporary benefit, though. The dragon will catch up and apply more pressure, both on inference price and capabilities.