maxglute
Yes they do. See how easy being flippant is.
> disproves
No it just proves you're business innumerate. The same economic rules at work is PRC fast follows on the cheap which gives them net pricing advantage, which in context of everyone bleeding money just means they lose less money. Losing money is structurally fine, i.e. forever subsidies for some companies, like tech giants with alternative revenue, it's lethal for pure play AI, which US SOTA are. Economics of bleeding the same, US SOTA just bleeding much more without a tourniquet.
> crappy models mostly don't matter
Well yeah, but we're not talking about crappy models. We talk about good enough models. Good enough models that siphon SOTA demand and force SOTA discount which otherwise funded/set pace for SOTA development. Good enough competition entirely matters.
> don't match your conclusions as I highlighted
Yes because I'm arguing against your points, which are bad, hence they don't match, by design.
> insurmountable lead in AI. If investors lose money, who cares
Well that's another tier of hopium. Back to reality, if you want US AI to lead, the setup you want is for US SOTA AI to be sustainable, you want OAI, ANT dollars to stretch as far as it can. You want Nvidia, ASML, SKHynix i.e. all the component makers whose margins exploded to revert to mean so US labs can buy more compute per $ while shovel makers rub pennies. What you don't want is hardware makers soaking up generational $$$ from investors and tech company warchests in mother of all tier boom/bust cycles that would starve future booms.
> Provide some predictions then.
ANT/OAI balance sheet will be obviously non-sustainable in 1-2 years. They will slow down frontier spending to balance book. They will fail and either political capture to be too big to fail, or be bought out by other US tech majors. Based on ANT operating margin going from positive to negative (i.e. lose for every dollar spent) for SpaceX compute commitments which is just first tranch/preview of what will happen for other 800b on horizon. Based on the market they thought they were going to capture, they no longer fully capture and can't capture at price they though (i.e. 80% reduction in API pricing recently - because they got deepseeked). So their TAM is smaller than they thought, their margins are being compressed faster they they thought, but they still have to spend/pay shovel makers like it hasn't. How about you show some math, where's the $$$ going to come from. We know their largest consumers are enterprise who are cutting back. Where are they going to find 100s of billion year year. Name high value niches they'll capture... frontier math, replacing underpaid TAs?
Cheaper models break financing SOTA pace, PRC budget fast follow currently is catching up. If SOTA slows/stalls slower SOTA pace = instead of PRC 6 months behind, they're 3 months behind, or period of overlapping parity before US SOTA grabs lead again for a few months. There may not be economic model to maintain durable lead, which SOTA economic doom spiral condition. Now if PRC fast follow couldn't close gap, i.e if PRC only fast following due to distillation and US SOTA can technically prevent PRC fast follow, and extend gap then maybe exorbitant SOTA spend sustainable. If not sustainable everyone moves to cheaper cycles. This an issue if SOTA cannot be done on the cheap, which also true for PRC, but PRC not doing expensive SOTA, they're doing cheap fast follow.
>why would AI be any different
It's not, someone going to grab big share of AI... but that someone has to be competitive enough for exquisite lock in, and frankly with enterprise reducing SOTA AI spend due to SOTA AI costs, current SOTA AI ain't it. See last paragraph for hopium.
> someone going to subsidize them indefinitely
Yes. Same way Alphabet/Meta can subsidize AI, China has their Baba and tech giants with alternate revenue streams to subsidize AI, even if not SOTA, and geopolitics will make sure US cannot run PRC AI out of business in PRC and vice versa. But geopolitics not stopping PRC companies running other PRC companies out of business, same with US companies running US companies out of business. In this case host countries tech giants with high margin businesses squeezing sole play AI labs. It's just US SOTA ANT/OAI getting murdered is massive economic contagion risk for US vs Zai/kimi not for PRC.
> find compelling
This really not complicated, last couple years, US SOTA labs signed 100s of billions of compute based on projected demand that they could monopolize enough demand to finance compute capitalization. This not stupid investor prior, because their only competitor, PRC was export controlled, compute constrained and shouldn't close gap. But PRC closed gap, made models good enough and architecture efficient / cheap enough so other players, including those in US, can capture large % of demand WHILE using fraction of compute. SOTA labs now looking at margin compression, losing share to good enough competitors and obligatory (now excessive) capitalization. This bad combo for current US SOTA economics. The numbers suggest this is what is happening. There is chance demand increases past projections and extra SOTA compute will be boon, but again, we are seeing most profitable SWE enterprise curtail not increase demand.
> Worst case is all the infra is still useful
IMO this actually best case for US medium term favour, but also another strike against CURRENT US SOTA. Reality is current SOTA is grossly overpaying for compute / AI premium. Even if OAI or ANT dies, their compute can be picked up for pennies on dollar and as long as PRC behind on compute there is potential for cheaper future US SOTA economics from cheaper hardware since crash will lead hardware price regress towards mean. But that boon is for the next guy.
Here's the US hopium: post current US SOTA crash, there is potentially curve where US has so much cheap discount compute, because current SOTA taking the haircut, and where PRC has not much compute, that US will have sustainable SOTA prospects, i.e. the world where US pays $1 for shovels instead of $10 and can buy $10000 worth of shovels while PRC can only buy $100. That's feasible after current exorbitant SOTA economics bleeds it's patients to death and the next US SOTA host get the transplants and lighter balance sheet, i.e. web 2.0 for SOTA AI. Incidentally more likely "winner" of AI... if I had to guess assuming incumbent FAANG doesn't just snatch up ANT/OAI if they explode - new player/entrant who are near SOTA and eventually SOTA but is priced more competitive than AI 1.0 SOTA, that enterprise will gladly pay for since not at current exorbitant rates that's causing enterprise to bail, but it will be fine because AI 2.0 SOTA can be sustained from 3T TAM instead of 30T TAM.
>whatever happens in America must happen in China too.
No, because PRC literally could not do what US did... they simply didn't have access to enough compute to dump so much $$$ capitalization for SOTA race. On the other hand, on paper US WITH MORE compute and (currently) CHEAPER compute can put forth cheaper models to undercut PRC open models... but functionally they can't for the same reason cheap PRC operators can't win in US - geopolitics. Undermining PRC AI requires giving PRC cheap US AI on cheap US compute which is sanctioned. But ultimately that is entirely irrelevant to the fact that CHEAPER US models will undercut EXPENSIVE SOTA US models. The undercutting is not symmetrical. US companies can use cheap PRC hammers (or even cheaper US hammers) to break $$$ US SOTA. US who on paper can provide even cheaper hammers to PRC... but cannot sell those hammers... so PRC stuck using cheap hammers... and since PRC never had chance to spend $$$ on SOTA, there's no equivalent valuable things to break even if they had cheaper hammers.
> trillions of dollars of investment going into these companies actually makes sense
We know the context for which those $$$ investment makes sense... if SOTA held meaningful lead to sell high volume of $$$ tokens which was hedge 1-2+ years ago when years of $$$ commitments were made. But doesn't seem to hold anymore, ergo it no longer makes sense. Microsoft had decades to build ecosystem and moat, just like adobe it was, actually hard and high friction to move away. People are switching models all the time. SOTA AI only labs has much less moat than Microsoft or other incumbent tech with decades of overlapping capture mechanisms.
> I think as a productive exercise someone should run this argument and explain why Chinese companies won't also be eaten alive
The productive answer is THEY ARE ALSO BEING eaten alive.
The even more productive answer is PRC commodity AI doesn't have to win for US SOTA AI to lose.
There's just not much meat on PRC AI bones so they are losing billions instead 100s of billions / trillions. Like there is ongoing domestic AI involution irrespective of US SOTA. Literally the primary reason PRC AI was forced to go free was because DeepSeek is billionaire side project who priced his hobby as free which set economics for all other players. Being sanctioned/compute constrained = they figured out how to close SOTA gap on the cheap but also set ceiling on how much they can lose on race to bottom. In so far their SOTA aspirations, again refer to DeepSeek, he takes some couch change from hedge fund gains or investors, and throws it at smart people and hope it's enough. If its not then they'll probably stop too. What PRC not going to do is mobilize resources equivalent to several % of GDP concentrated in few entities for SOTA AI, at least not until their compute is sorted, in which case competitive exposure / risks becomes symmetrical. In the mean time, things are not symmetrical and arguments against economics of US SOTA AI does not apply to PRC commodity AI.
Because that's the point. It's a cheap reliable car that cut corners for high $$$ ROI fleet cars. There's reason most of PRC taxi fleet converted to BYD EVs over last 10 years. It's statistically battle proven and economical, they'll 500,000km like ICE fleet cars and save 30k USD - on fuel + maintenance savings alone you can buy another 2 fleet BYDs. Like a fleet operator would have to be economically stupid to not go for BYD tier EV. You get to enjoy cheap seats.
There's ~20 years of record that those believing western MSM reporting becuz muh free press on PRC are basically mouth breathing rubes at this point. There's are literally 10s of millions of PRC diaspora whose banal wisdom of crowd gossip has been more reliable signal than western reporting. Pick the most rabid PRC nationalist twitter account vs Economist and compare notes, and statistically the brain damaged nationalist would prove to be more accurate/predicative. Free press =/= accurate. There's a reason free press stans are some of the dumbest motherfuckers on PRC.
Like it's 2026, 5th estate for propaganda has been thoroughly gamed system by now. Why does PRC develop so many spies / use their diaspora for information... because they know US / western free press is compromised to make useful idiots "feel" that 5th estate reports the truth because they theoretically could (even when they don't). Not that they even could, reminder PRC gave most US reporter the reciprocal boot, no press freedom doesn't magically only hobble PRC 5th estate, though that never stopped western libtard reporters and rightoid thinktankers from making shit up - its just there's no pretense that they aren't anymore, all the while US gov allocates 100s of millions for information warfare.
Literally coal considering latest data, i.e. not historic data that caps at 2024. 2025 potential tipping point, total coal generation TWh down in absolute terms, during record export year. 2026 on trend for another ~1% YoY decline. Peaking coal for energy generation part of 2026-2030 15th 5Y plan, we're in the _planned_ plateau phase, and decline after. Of course planned / projected, but we're edging to 2 consecutive years of declining absolute coal generation. Full trend is line goes up suddenly stops. Now to be completely fair, there was 2 years of coal decline 10 years ago when PRC was fighting war on pollution and stalled a bunch of factories and shuttered coal plants i.e. total electric generation stalled. Current structure shift from construction (less steel / less concrete), but total electric generation also growing.
That's just for power generation, you're right coal use set to increase for petchem, i.e. replace oil for industrial inputs since coal feedstock cheaper than oil at current prices. But in terms of energy, coal is not increasing despite new coal infra is increasing to more efficiently use coal for peaking instead of baseload. You're also right PRC doesn't "hate" coal, I mean it would probably love to have ample cheap oil/ng, but unlimited coal is good consolation / contingency at least until renewable share becomes dominant. PRC loves domestic coal for energy security, but not enough to burn it forever especially when the economics don't make sense, but enough to have insurance infra to burn in ample amounts just in case.