the day that these guys need to turn a profit will be the day that a lot of people lose access to this sort of thing
Techcrunch reports that AI coding tools have "very negative" gross margins. They're losing money on every user.
Submitted 8 months ago by Davriellelouna@lemmy.world to technology@lemmy.world
https://techcrunch.com/2025/08/07/the-high-costs-and-thin-margins-threatening-ai-coding-startups/
Comments
nutsack@lemmy.dbzer0.com 8 months ago
Bogasse@lemmy.ml 8 months ago
I was gonna make a sarcastic comment on how surprised I was that a 5$ subscription is not enough for something so heavy that it requires building new nuclear plants.
But holly shit, ChatGPT+ is 23€/months.
HugeNerd@lemmy.ca 8 months ago
You mean Clippy++ 2.0 auto-complete with jpgs isn’t a business model?
BarneyPiccolo@lemmy.today 8 months ago
If that’s really true, then we should all sign up.
normalexit@lemmy.world 8 months ago
They are in the train the trainer phase where developers are training their models and getting some benefit from the results it spits out.
The enshitification will begin soon. They have already talked about inserting ads in responses.
I fear people will grow attached to AI chats, which will emotionally manipulate them into buying stuff or supporting specific causes. The ads on a platform like this are going to make google AdWords and pay per click feel like advertising in the newspaper.
irish_link@lemmy.world 8 months ago
So what I am learning is that I should start vibe coding even the small scripts that are less than 10 lines.
Done. I will start doing that.
gravitas_deficiency@sh.itjust.works 8 months ago
Man I cannot fucking wait until this stupid goddamn bubble pops
haungack@lemmy.dbzer0.com 8 months ago
And what happens when a bubble bursts? Did the internet die when the dotcom bubble burst, or is that just when it really started to get going?
I share most of your sentiments against AI, but a bubble popping won’t make it go away, and it won’t even rectify it to be more to people’s likings (i doubt it). It takes more than just waiting around to accomplish that.
Zexks@lemmy.world 8 months ago
Im so tired of this stupud fucking refrain. Cause we all know how housing got so mich better after 08 and how we dont have any more dot coms and how the internet got so much better since that bubble. You people have no idea what your even asking for.
BarneyPiccolo@lemmy.today 8 months ago
The problem is that when a bubble pops and exposes the problem, the government leaders should take the opportunity to fix the problem so it doesn’t happen again.
Instead they bail them all out, so there are not only no consequences to their actions, they are literally rewarded with unimaginable wealth. What about this strategy would induce them to change their ways, over doing it all over again, and getting rewarded again?
pulsey@feddit.org 8 months ago
the bubble pops and then eerything comes back, in an “improved” version. Imagine: ChatGPT with ads and sponsored answers.
Just like that one black mirror episode.
HugeNerd@lemmy.ca 8 months ago
Me too. I can then go back to 3D printing quantum blockchains out of room temperature superconductors in my private space station with Katy Perry.
Doomsider@lemmy.world 8 months ago
I find that hard to believe right up until the point you mentioned Katy.
TheObviousSolution@lemmy.ca 8 months ago
In other words, they want to hook up users and companies, make them dependent, and then rise up the prices severely while finding ways to process and incorporate all of the data they’ve gathered in ways that will probably involve automating the jobs of the users themselves.
snf@lemmy.world 8 months ago
aka enshittification
HeyThisIsntTheYMCA@lemmy.world 8 months ago
oh no
ChaoticEntropy@feddit.uk 8 months ago
Basically, the only reason some of these vaguely functional AI tools actually work okay is because they haven’t been ruined with inevitable monetisation yet.
tempest@lemmy.ca 8 months ago
Already the cost is quite high. A prolific year can easily burn 100usd a day in tokens and they have not even started to enshitify.
Some of the cost to run these models will come down a bit if Nvidia gets some actual competition which I’m sure will happen in the medium to long term because the hyper scalers definitely don’t like paying Nvidia’s AI ransom and the Chinese don’t want to be beholden to a company the US can influence.
We will see which happens first.
drmoose@lemmy.world 8 months ago
Caveat: this applies to literally every new technology especially in the VC funded world.
buddascrayon@lemmy.world 8 months ago
Yes, this is part of the business model. The goal is to get everyone addicted to their service, then jack the price up to profitable margins. It’s the same model Netflix and Amazon used. Bothe services lost money for over 10 years before becoming profitable.
Ilovethebomb@sh.itjust.works 8 months ago
YouTube as well.
toothpaste_ostrich@feddit.nl 8 months ago
Venture capitalism is what it’s called, I think
buddascrayon@lemmy.world 8 months ago
It is not venture capitalism. Though it is fueled by venture capitalism. I am describing the type of car and you are calling it gasoline. They’re most distinctly not the same thing.
However it should be noted there both a part of the same corrosion of our society. Just how automobiles that run on gasoline are a corrosion on our atmosphere.
Saledovil@sh.itjust.works 8 months ago
Venture capitalism is when you give somebody money to start a business in hopes that they make it big, giving you really valuable equity for relatively little money. What you’re thinking of is blitzscaling. Scale up in an unsustainable way in order to gain market dominance, so that you can use that to become profitable.
MehBlah@lemmy.world 8 months ago
Now I’m suddenly tempted to start using it. or at least coming up with a bot to keep it busy.
WhirlpoolBrewer@lemmings.world 8 months ago
Holy crap, has anyone ever attempted to create an “AI fork bomb”? Go to one of these agent bots, and tell it to create accounts with the other agent code bots. These new accounts will all be told to create accounts on all the other code bots services. And do this recursively forever. So the flow would be 1 bot makes lets say 5 bots. Each of those 5 bots make 5 more bots. And each of those 5 bots make 5 more. So the total number of running bots becomes like 1 * 5 * 5 * 5 * 5…
Obligatory, this is purely hypothetical, and you should never do this for legal reasons.
yarr@feddit.nl 8 months ago
So much of the AI stuff we see today are boards reacting and worrying about being “left behind” in AI. In many cases, the goal is not to deliver value. The goal is to be able to attach a little sticker that says “AI” to their products to excite the shareholders.
Unfortunately in this case, some of the largest companies in the world haven’t been able to figure out how to run AI services at a profit.
This could change any day if some more efficient hardware arrives, but until then, most of the software world is just crossing their fingers it becomes profitable one day while they light dollar bills on fire in their datacenters.
If this isn’t “bubbleish” behavior I don’t know what is.
null_dot@lemmy.dbzer0.com 8 months ago
I was in a local bike store looking at red tail lights yesterday.
One brand Lezyne had several versions. There was an “AI Alert” one. I looked it up and it just has a sensor to detect when you brake and it changes to a different flashing mode at that time.
Thats barely even “smart” let alone “AI”.
The stupid thing is, because of this dumb claim they needed to confirm that it doesn’t collect and transmit any data about your riding habits. Its a light with no connectivity other than a charging port.
The dumbfuckery is astonishing.
sfxrlz@lemmy.dbzer0.com 8 months ago
Greed for the future baby
Simulation6@sopuli.xyz 8 months ago
AI reminds me of how nuclear fusion has been around for decades, and you would read the occasional article about some small advancement and it always seemed to be 10 years away and then suddenly they are building a power plant somewhere when it doesn’t even work yet.
bigfondue@lemmy.world 8 months ago
Sure, we’re losing energy with every He atom we fuse, but we make up for it in volume!
Treczoks@lemmy.world 8 months ago
Good. Costs is the key point to get rid of it.
OctopusNemeses@lemmy.world 8 months ago
Isn’t this just the tech industry. Run at a loss. Eat VC money. Wait. Wait.
Some how you become normalized and suddenly important Next thing you know you’re raking profit.
hark@lemmy.world 8 months ago
Yep, and they were helped a lot after the 2008 financial crisis when interest rates were dropped super low and loans were cheap. That’s a major reason why the market has been screaming for the fed to cut the interest rate as much as possible.
Tollana1234567@lemmy.today 8 months ago
after crypto, and Now AI, they will be chasing whatever faux tech that comes out next.
rozodru@lemmy.world 8 months ago
and then you go on linkedin and all the middle manager tech bros will hail it as the second coming.
cupcakezealot@piefed.blahaj.zone 8 months ago
first truly positive use for ai
tal@lemmy.today 8 months ago
I’m skeptical of AI coding as it exists today, and while I’m bullish on long-term prospects for AI writing software, am very dubious that simply using LLMs is going to be the answer.
However.
Startups typically do lose money. They’ll burn money as they acquire a userbase — their growth phase — and transition to profitability later. I don’t think “startups in area X tend to be losing money” is terribly surprising.
Dogiedog64@lemmy.world 8 months ago
Ok, but it isn’t just startups burning money here like there’s no tomorrow - it’s also major industry leaders (Microsoft, Facebook, Apple, Google, Nvidia, etc.) dumping hundreds of billions into infrastructure and development of a tech that has, so far, shown 0 positive returns for anyone and everyone. Everyone involved is pouring in money like it’s going out of style, largely because they see this as a potential pathway to infinite profits down the line, just as long as THEY are the ones to get there first; consequences be damned. WHEN this bubble pops, not IF, it’ll be messy. Extremely messy.
rozodru@lemmy.world 8 months ago
you’re VERY justified in feeling skeptical, I’m seeing it first hand, you’re correct.
I’m a consultant/freelancer and I’m booked for the rest of the year and well into the new year with jobs that pretty much consist of me reviewing and cleaning up AI slop.
Most of my clients are startups and small companies that went full in on AI and vibe coding. Now they’re discovering that their attempts to save a few bucks by leveraging AI, cutting devs, etc is costing them more that what they envisioned on saving. The stuff they’ve built with AI doesn’t scale, is full of exploits, and breaks quickly. With the recent Tea App thing many of my clients are now in a panic because they essentially did the exact same thing. They don’t want their startup to be next in the news because some rando came across their house with the front door left open by AI.
the tech debt is massive, It’s costing many of these places more to fix their vibe coders/AI mistakes than what it would have originally cost if they just used a solid dev team. Make no mistake, I’m charging them a good amount also.
All if it could have been avoided though. They could have continued to use their LLM’s if they had all just kept a leash on it. if they dismissed the concept of vibe coding. A good chunk of it could have been avoided if the person feeding the prompts simply REVIEWED the code before hitting enter. I’m not kidding, IF they just LOOKED at what was being spat out things would be different. none of them did. they just trusted the AI to be smarter because they were lead to believe it was.
traceur301@lemmy.blahaj.zone 8 months ago
how do you book software work so far out? for some reason my software clients seem to all want their stuff yesterday
twix@infosec.pub 8 months ago
Ed Ziltrom has a good piece regarding whether the losses are “just another startup” or something more. I am very much leaning towards “burning money at an insane rate just to give the impression of growth”.
ChairmanMeow@programming.dev 8 months ago
The issue is mostly energy costs though. Startups do lose money; to hiring new people, marketing, etc… But in this case the entire business case loses money a the moment, and without any significant breakthroughs they likely will keep losing money like that.
Tollana1234567@lemmy.today 8 months ago
MS already said as much, thier generative AI isnt profitable at all.
DonutsRMeh@lemmy.world 8 months ago
In capitalism, everything is a bubble, even capitalism itself. The AI one is going to burst at some point. Then AI becomes a normal thing in the background like everything else we have gone through in this dumbass of a timeline.
vacuumflower@lemmy.sdf.org 8 months ago
Selling grain for coal, coal for iron and iron for paper is capitalism, but not a bubble.
Whether it becomes a normal thing depends on the cost.
brandon@piefed.social 8 months ago
That's not capitalism, that's a market.
josefo@leminal.space 8 months ago
Good
BetaBlake@lemmy.world 8 months ago
Preach, I hope they fuck themselves with all this stupid ass AI
mojofrododojo@lemmy.world 8 months ago
when this bubble pops it’s gonna be horrific.
google, meta, ms, so many more leveraged out huge investments in datacenters. nvidia is propping up whole segments of the fucking economy.
www.wheresyoured.at/ai-is-a-money-trap/
it’d be fun to watch if I could isolate myself from the chaos that will ensue, but we’re all gonna get fucked by the aibros, it’s only a question of which segment of the economy blows up first.
skisnow@lemmy.ca 8 months ago
A lot of startups whose entire business model relies on OpenAI’s small model API calls costing under $1/Mtok, are going to go bust when OpenAI finally runs out of money and ramps the cost up tenfold.
Mika@sopuli.xyz 8 months ago
It would be just cheaper to self-host something for the whole company then? Open-source AIs are there and they are very much competitive with proprietary solutions.
Tollana1234567@lemmy.today 8 months ago
ive seen a ton of billboards of startup AI comp in west coast, i assume every new one that appears on these billboards, the old ones go under.
mojofrododojo@lemmy.world 8 months ago
good point, it’s all been artificially priced to get users onboard then dedicated.
vector42@programming.dev 8 months ago
Came here to see if someone had mentioned Ed Zitron’s blog. His last two pieces on the AI bubble are fantastic reads.
mojofrododojo@lemmy.world 8 months ago
pretty sure someone here linked it, it’s a long read and worth it.
electricyarn@lemmy.world 8 months ago
The electrical industry is going to have a real bad time.
mojofrododojo@lemmy.world 8 months ago
yeah secondary knockon effects - once nvidia realizes it’s not going to actually sell 5 gpus per human being, the datacenters for them evaporate, then the power production to feed those datacenters becomes pointless…
an effective administration would mandate all renewable energy for this purpose, so when it implodes they could at least derive a benefit from the expanded production… but no, trump will have them build coal plants for it all. or like grok, methane powered generators fml
BetaBlake@lemmy.world 8 months ago
Hopefully sooner rather than later, and maybe Elon can stop poisoning a neighborhood in Memphis with Grok
mojofrododojo@lemmy.world 8 months ago
yeah that’s one of the more egregious examples, basically a methane factory that eats prodigious amounts of water and power, all in process of giving us MECHAHITLER.
what’s not to love?
SpaceCowboy@lemmy.ca 8 months ago
Yeah I’m getting real dot com bubble vibes from all of this.
mojofrododojo@lemmy.world 8 months ago
I think the fallout is going to be much larger.
Thorry84@feddit.nl 8 months ago
There is another factor in this which often gets overlooked. A LOT of the money invested right now is for the Nvidia chips and products based around them. As many gamers are painfully aware, these chips devalue very quickly. With the progress of technology moving so fast, what was once a top of the line unit gets outclassed by mid tier hardware within a couple of years. After 5 years it’s usefulness is severely diminished and after 10 years it is hardly worth the energy to run them.
This means the window for return on investment is a lot shorter than usual in tech. For example when creating a software service, there would be an upfront investment for buying the startup that created the sofrware. Then some scaling investment in infrastructure and such. But after that it turns into a steady state where the input of money is a lot lower than revenue from the customer base that was grown. This allows to get returns on investment for many years after that initial investment and growth phase.
With this Ai shit it works a bit different. If you want to train and run the latest models in order to remain competitive in the market, you would need to continually buy the latest hardware from Nvidia. As soon as you start running on older hardware, your product would be left behind and with all the competition out there users would be lost very quickly. It’s very hard to see how the trillions of dollars invested now are ever going to be recovered within the span of five years. Especially in a time where so much companies are dumping their products for very low prices and sometimes even for free.
This bubble has to burst and it is going to be bad. For the people who were around when the dotcom bubble burst, this is going to be much worse than that ever was.
Tollana1234567@lemmy.today 8 months ago
no wonder the ceo of nivida was so jovial and happy and has been in the news recently.
panda_abyss@lemmy.ca 8 months ago
They’ll write this off as a loss and offset their corporate taxes
Also china is a great example that you do not need all the latest hardware, but it does help
mojofrododojo@lemmy.world 8 months ago
yeah datacenters never really aged well, and making the gpu dependent is going to make them age like hot piss. and since they’re ai-dedicated gpus, they can’t even resell them lol.
all this investment, for what? so some chud can have a picture of taylor swift with 4 tits?
fucking idiots
Revan343@lemmy.ca 8 months ago
This is the best argument I’ve heard in favour of vibe coding
Feyd@programming.dev 8 months ago
It’s interesting that the media sites that historically steered clear of economics are starting to talk about it (this is not a new revelation)
pr06lefs@lemmy.ml 8 months ago
Ha, anyone DOSing them with constant compute requests? I read an article where a 200$ a month user was using tens of thousands of dollars of compute.
BlameTheAntifa@lemmy.world 8 months ago
When this bubble eventually bursts, and it will, the economic fallout is going to be catastrophic.
Pxtl@lemmy.ca 8 months ago
But they make it up on volume!
_AutumnMoon_@lemmy.blahaj.zone 8 months ago
good, everyone flood the AI with useless tasks so they go bankrupt