Sam Altman's AI infrastructure bet is paying off, but the bill is coming

Sam Altman's "compute is destiny" bet looks right, but AI giants face big questions on costs, revenue, and demand for smarter models.

TL;DR

The AI market's demand for computing power is surging, validating Sam Altman's "compute is destiny" philosophy.
OpenAI's aggressive infrastructure deals are looking pragmatic, while rival Anthropic faces outages and service degradation.
Reports of internal disagreements at OpenAI regarding the cost of infrastructure deals have been dismissed, with leadership affirming alignment on acquiring compute.
Both OpenAI and Anthropic are experiencing significant financial losses, raising questions about the profitability of cutting-edge AI.
Strategies to improve sustainability include model optimization (efficiency gains) and moving "up the stack" to offer specialized tools and enterprise products.
Newer, more powerful GPUs are on the horizon, driving the current race to secure compute capacity for future AI models.
A key challenge remains determining if there will be sufficient market demand for vastly more capable AI models.

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clem 🤗 reposted

The Transcript

Sam Altman: AI spend intensity has become a major customer concern almost overnight

"Probably the second biggest theme is just around cost. People are really saying, that's kind of become a meme now, but 'my company spent my entire 2026 budget in Q1. Can you make this more efficient?'...that went from, at the beginning of this year, an issue that never came up—I know people were totally happy with the amount they were spending—to all of a sudden a huge issue"

clem 🤗 reposted

Polymarket

JUST IN: Sam Altman says AI budgeting has suddenly become a “huge issue” for companies.

clem 🤗 reposted

Tommy

The most basic way AI could blow up imo. I'm not saying it does but this is the most obvious way I can see it happening

- Per seat subscriptions are massively subsidized. The flat fee was priced way below what heavy usage actually costs

- For real business use you have to move to the API anyway. Data protections, work integrations and compliance officer approval

- On the API you pay metered rates, and businesses are burning credits way faster than the per seat pricing ever led them to expect

- This is everywhere right now. Internally for us, Codex users, Uber torching its entire 2026 AI budget in 4 months, the Microsoft comments. Just go try an API

I shared more on this here: https://t.co/iZrqrCAIRW

- And I don't think most businesses have the money to keep paying increasing API rates without a real change to how they operate (caps needed)

- Because they have a cheap alternative. They can reach open source models through any aggregator (OpenRouter, Venice, Baseten, Together) and still get strong privacy. Venice private data centers, or E2EE/TEE serving GLM 5.1.

More on open source inference provider raises here: https://t.co/7kf56P44yQ

- And the discount is enormous. DeepSeek V4 codes within a hair of Opus on SWE bench at roughly 1/30th the price, and the cheapest open models run closer to 1/100th

- Chinese labs open source frontier grade models. The model is the single biggest cost an inference provider has, and they get it for free

- This idea dies if China goes closed source. That is actually bullish web2 AI labs, because if everyone is closed you pay up for the best intelligence. China goes closed source if they are tired of giving away an asset and they want the revenue and data flow to train new models

- Is this showing up in web2 AI lab revenue yet? No. Revenue is off the charts. Anthropic went from 9B to 47B run rate in five months

- So go forward, what happens?

- I think revenue slowly starts leaking to the open source inference providers (see Venice usage, OpenRouter's $113M raise, Baseten is raising at $11B or triple its valuation in three months, on revenue that went from $200M to $600M annualized in a single quarter)

- It doesnt move overnight, but it caps the labs ability to raise prices, and margins are already deeply negative. OpenAI is reportedly running near negative 122%

- With margins that bad there is no cash flow, so the labs are fully dependent on outside capital to buy GPUs, train models, and keep subsidizing usage (I.e. see Google tapping $80b equity sale, granted 30b for employee RSU taxes. Clearly they think Equity is overvalued or you wouldn't sell it)

- The break comes when that capital stops. Pricing is capped so margins cant improve, and the moment investors lose conviction on payback, the whole flow reverses

- Why would they lose conviction on payback? Back to the start - the inability to improve margins or get businesses to pay more

- This is also limiting, if we start making new drugs with AI or create entirely new businesses, you better believe people will pay up to the max for AI usage

Yann LeCun reposted

DavidLinthicum

The Emperor Has No Clothes: Why the AI Infrastructure Buildout Math Doesn't Work

I have to give IBM CEO Arvind Krishna credit. He's saying what many of us in this industry have been thinking but haven't been willing to say out loud. The math just doesn't add up.

Here's what I'm seeing that's deeply troubling. We're in the middle of another mass hallucination. Just like the dot-com bubble, just like blockchain, just like the metaverse — everyone is convinced that building massive data centers will automatically create massive wealth.

But here's the thing about building infrastructure. You actually have to sell what's inside it.

Let's talk numbers. The planned data center buildout over the next 5-10 years is staggering. We're talking about commitments in the hundreds of gigawatts globally. The capital expenditure commitments are in the trillions. Yet when you look at the actual demand signals, not the projections, not the potential, but the actual consumption patterns, there's a massive gap. These AI companies are betting everything on demand that simply doesn't exist at the scale they're planning for.

Let me be direct. AI services are expensive. Enterprise adoption is slow. Consumer AI is still finding its footing. And the compute requirements being promised by the hyperscalers require a level of demand that would represent a fundamental shift in how businesses consume technology. That's a big ask.

I've seen this pattern before. The overbuilding. The belief that if you build it, they will come. The groupthink that turns critical analysis into heresy. The result is always the same. Companies are going to touch the stove. We're going to see massive write-downs. We're going to see pivots, shutdowns, and strategic reviews. We're going to see companies that spent years and billions trying to be the AI infrastructure leader become case studies in how not to read a market.

The IBM CEO is right. The math doesn't work. And unlike 1999, we don't have the excuse of we didn't know. We know exactly what's happening. We just don't want to believe it because the alternative, being a skeptic while everyone else is piling in, feels like career suicide. It's not. The ones who survive the next decade will be the ones who built for reality, not fantasy.

Wake up. The emperor has no clothes.

As reported by Futurism, Krishna laid out striking calculations: a 1 gigawatt data center costs roughly $80 billion today. If one company commits 20-30 gigawatts, that's $1.5 trillion in capital expenditure. The total commitments across the industry for chasing AGI are approximately 100 gigawatts, equaling $8 trillion. To break even, you'd need $800 billion in profit just to cover the interest. That's not investment. That's hoping.

https://t.co/4DAnF5OPfa

clem 🤗

the future of AI is multi-model (including a majority of open-source ones provided by @huggingface of course!)!

Aravind Srinivas reposted

Cassandra Unchained

This is true as I have heard this from contacts in the Valley. Goes with my pinned post.

The AI race is shifting from bigger models to cheaper, smarter systems https://t.co/lS1YKxkjl0