We’ve seen this pattern before. This happened in the 1990s during the original dot-com boom. Investors gamble, everything is subsidized, most companies fail, and the ones left standing then raise prices.
I don't think it's that wild. Hardware will improve together with performance, but once the market stops expanding and behaviour gets stagnant the market shares will solidify, so you better aim to have a large portion to make the scale together with the improvements help reach profitability.
I think the far more reasonable assumption is: It's profitable enough to not get super nervous about the existence of your company. You have to build very costly models and build insanely costly infrastructure. Running all of that at a loss without an obvious next step, because ALL of them are pricing to not even make money at inference, seems to require a lot of weird ideas about how companies are run.