[HN Gopher] How much revenue is needed to justify the current AI...
___________________________________________________________________
How much revenue is needed to justify the current AI spend?
Author : polskibus
Score : 54 points
Date : 2025-10-11 20:49 UTC (2 hours ago)
(HTM) web link (pracap.com)
(TXT) w3m dump (pracap.com)
| gyomu wrote:
| There are two main threads I keep going back to when thinking
| about long term AI and why so many investors/statespeople are all
| in:
|
| 1) the labor angle: it's been stated plainly by many execs that
| the goal is to replace double percent digits of their workforce
| with AI of some sort. Human wages being what they are, the
| savings there are meaningful and seemingly worth the gamble.
|
| 2) the military angle: the future of warfare seems to be
| autonomous weapons/vehicles of all sorts. Given the winner takes
| all nature of warfare, any edge you can get there is worth it. If
| not investing enough in AI means the US gets steamrolled by China
| in the Pacific (and other countries getting steamrolled by
| whomever China wants to sell/lend its tech to), then it seems to
| justify most any investment, no matter how ridiculous the current
| returns seem.
| Analemma_ wrote:
| > it's been stated plainly by many execs that the goal is to
| replace double percent digits of their workforce with AI of
| some sort
|
| Even if we grant that this is possible, have any of these execs
| actually thought through what happens when their competitors
| _also_ replace large chunks of their workforce with AI and then
| begin undercutting them on price? The idea that "our prices
| will stay exactly the same, but our salary costs will go to
| zero and become pure profit instead!" is delusional _even if_
| AI can actually replace large numbers of people, which itself
| is quite doubtful.
| nothercastle wrote:
| Presumably if your competitors go to 0 workers before you do
| they win but in practice that's unlikely to work. Most
| companies would be better off buying mature tech once clear
| savings opportunity materialize.
| JumpCrisscross wrote:
| > _idea that "our prices will stay exactly the same, but our
| salary costs will go to zero and become pure profit instead!"
| is delusional_
|
| Has anyone said this?
|
| The point is such a shift would transfer spending from labour
| to these AI companies. That satisfies their investors' thesis
| requirement.
| bitmasher9 wrote:
| Except AI companies are competing with each other for that
| revenue so total spend will go down.
| JumpCrisscross wrote:
| > _AI companies are competing with each other for that
| revenue so total spend will go down_
|
| You're describing elasticity. None of this is
| particularly novel. If there is sufficient demand, the
| thesis is met: returns may not be astronomical, but
| they'll be positive for at least some of the major
| players. (Those with the most efficient operations or
| ability to command a price premium.)
| nothercastle wrote:
| Warfare isn't really a winner takes all affair. Unless you
| absolutely crush your enemy most warfare ends in a stalemate of
| one form or another with the victor getting an advantage over
| the looser. In many cases medium tech advantages can be
| countered either with better logistics, willingness to trade
| losses or quality of weapons.
| aswanson wrote:
| I think the ai angle for warfare is overhyped. Most of the
| autonomous drone stuff happening in Ukraine is not running on
| bleeding edge nodes. It's radxa sbcs with process nodes from 10
| years ago.
| aeon_ai wrote:
| I generally get frustrated about this type of framing because
| it's myopic and narrow.
|
| We are in geopolitically fraught times. Money alone is not
| capital.
|
| We have been living in an era where financial capital has
| dominated.
|
| We are entering an era where computing capital, intellectual
| capital, and military capital will dominate.
|
| The people in control of those when the game changes are the ones
| writing the rules.
| JumpCrisscross wrote:
| > _We are entering an era where computing capital, intellectual
| capital, and military capital will dominate_
|
| These are bullshit terms. Capital is capital. Military
| production, IP production and yes, AIs running in datacentres
| and on the grid, are all subject to economic forces. (Folks
| argued railroads were a different form of capital in the 19th
| century, too. And fibre optics. And tulips. And dot-com
| companies. And computer-assembled American mortgage
| instruments.)
|
| We might be investing for a golden future. We might be the
| Soviet Union baited into unsustainable spending commitments.
| The answer to these questions isn't in pretending this time is
| different, or that economics can be suspended when it comes to
| certain questions of production and return.
| 827a wrote:
| > the industry is spending over $30 billion a month
| (approximately $400 billion for 2025) and only receiving a bit
| more than a billion a month back in revenue.
|
| I suspect that this revenue number is a vast underestimation,
| even today, ignoring the reality of untapped revenue streams like
| ChatGPT's 800M advertising eyeballs.
|
| 1. Google has stated that Gemini is processing 1.3 quadrillion
| tokens per month. Its hard to convert this into raw revenue; its
| spread across different models, much of it is likely internal
| usage, or usage more tied to a workspace subscription rather than
| per-token API billing. But to give a sense of this scale, this is
| what that annualized revenue looks like priced at per-token API
| pricing for their different models, assuming a 50/50
| input/output: Gemini 2.5 Flash Lite: ~$9B/year, Gemini 2.5 Flash:
| ~$22.8B/year, Gemini 2.5 Pro: ~$110B/year.
|
| 2. ChatGPT has 800M weekly active users. If 10% of these users
| are on the paid plan, this is $19.2B/year. Adjust this value
| depending on what percentage of users you believe pay for
| ChatGPT. Sam has announced that they're processing 6B API tokens
| per minute, which, again depending on the model, puts their
| annualized API revenue between $1B-$31B.
|
| 3. Anthropic has directly stated that their annualized revenue,
| as of August, was $5B [2]. Given their growth, and the success of
| Claude 4.5, its likely this number is more around $6B-$7B right
| now.
|
| So, just with these three companies, which are the three biggest
| involved in infrastructure rollouts, we're likely somewhere in
| the realm of ~$30B/year? Very fuzzy and hard, but at the very
| least I think its weird to guess that the number is closer to
| like $12B. Its possible the article is basing its estimates on
| numbers from earlier in 2025, but to be frank: If you're not
| refreshing your knowledge on this stuff every week, you're out of
| date. Its moving so fast.
|
| [1]
| https://www.reddit.com/r/Bard/comments/1o3ex1v/gemini_is_pro...
|
| [2] https://www.anthropic.com/news/anthropic-raises-series-f-
| at-...
| N70Phone wrote:
| > even today, ignoring the reality of untapped revenue streams
| like ChatGPT's 800M advertising eyeballs.
|
| Respectfully, the idea of sticking ads in LLMs is just copium.
| It's never going to work.
|
| LLMs' unfixable inclination for hallucinations makes this an
| infinite lawsuit machine. Either the regulators will tear
| OpenAI to shreds over it, or the advertisers seeing their
| trademarks hijacked by scammers will do it in their stead. LLMs
| just cannot be controlled enough for this idea to make sense,
| even with RAG.
|
| And if we step away from the idea of putting ads in the LLM
| response, we're left with "stick a banner ad on chatgpt dot
| com". The exact same scheme as the Dotcom Bubble. Worked real
| well that time, I hear. "Stick a banner ad on it" was a shit
| idea in 2000. It's not going to bail out AI in 2025.
|
| The original content that LLMs paraphrase is itself struggling
| to support itself on ads. The idea that you can steal all those
| impressions through a service that is _orders and orders of
| magnitude more expensive_ and somehow turn a profit on those
| very same ads is ludicrous.
| jcranmer wrote:
| > 2. ChatGPT has 800M weekly active users. If 10% of these
| users are on the paid plan, this is $19.2B/year. Adjust this
| value depending on what percentage of users you believe pay for
| ChatGPT. Sam has announced that they're processing 6B API
| tokens per minute, which, again depending on the model, puts
| their annualized API revenue between $1B-$31B.
|
| OpenAI announced a few months ago that it had finally cracked
| $1B in monthly revenue (intriguingly, it did so _twice_ , which
| makes me wonder how much fibbing there is in these statements).
|
| I'll also say this: the fact that AI companies prefer to tout
| their usage numbers rather than their revenue numbers is a sign
| that their revenue numbers isn't stellar (especially given that
| several of the Big Tech companies have _stopped_ reporting AI
| revenue as separate call-outs).
| iLoveOncall wrote:
| > ChatGPT has 800M weekly active users. If 10% of these users
| are on the paid plan
|
| I wouldn't believe it if you told me even 1% of those users are
| paying. 10% is simply ridiculous.
| chubot wrote:
| I believe Google has earned the most revenue of any business ever
| [1]
|
| So if the idea is to unseat Google, and make LLMs that are
| monetized by ads -- well that would be a lot of revenue!
|
| The problem is obviously that Google knows this, and they made
| huge investments in AI before anyone else
|
| ---
|
| I guess someone wants to do to Google what Apple did to Microsoft
| in the mobile era -- take over the operating system that matters
| by building something new (mobile), not by directly trying to
| unseat Microsoft
|
| The problem seems to be that no one has figured out what the
| network effect in LLMs is. Google has a few network effects, but
| the bidder / ad buyer network is very strong -- they can afford
| to pay out a bigger rev share than anybody else
|
| Google also had very few competitors early on -- Yahoo was the
| most credible competitor for a long time. And employees didn't
| leave to start competitors. Whereas OpenAI has splintered into 5
| or more companies, fairly early in its life
|
| [1] at least according to the Acquired podcast, which is
| reputable
|
| edit: oops, it was profit, not revenue
|
| https://www.acquired.fm/episodes/google
|
| _Google with this business model makes more profits than any
| other company, ergo tautologically, is the most magical business
| model ever discovered._
| JumpCrisscross wrote:
| > _problem seems to be that no one has figured out what the
| network effect in LLMs is_
|
| The network effect is principally training data. User prompts
| (and feedback) are valuable. Nothing, however, suggests
| anything stronger than weak network effects. Hence OpenAI
| running TV ads.
| jcranmer wrote:
| > I believe Google has earned the most revenue of any business
| ever [1]
|
| By yearly revenue, the highest revenue company is Walmart,
| followed by Amazon, which make somewhere near twice the revenue
| of Alphabet (around 11th place, per https://en.wikipedia.org/wi
| ki/List_of_largest_companies_by_r...). Especially if you
| account the inflation, the total lifetime revenues of the major
| oil companies will easily dwarf Google.
|
| Google is nowhere close to earning the most revenue of any
| business ever.
| suriya-ganesh wrote:
| There's difference between running on a margin of 5% and 90%
| at those scale
| JumpCrisscross wrote:
| > _There 's difference between running on a margin of 5%
| and 90% at those scale_
|
| OP said revenue, not profit. And neither of those numbers
| are relevant to Google, which runs a 32% (28%) operating
| (net) margin [1].
|
| That said, yes, Google _is_ the most profitable company in
| the world [2]. But its $116bn is not in a different league
| from Microsoft 's $102bn, Apple's $99bn or Saudi Aramco's
| $96bn.
|
| [1] https://s206.q4cdn.com/479360582/files/doc_financials/2
| 025/q...
|
| [2] https://www.financecharts.com/screener/most-profitable
| jcranmer wrote:
| The claim was "most revenue."
|
| Of course, even you go by most profit, Saudi Aramco still
| has Google beat, because it turns out that being able to
| charge highest market price for oil that costs you
| $5/barrel to make and being around for decades gives you an
| astounding lifetime net profit.
| bitmasher9 wrote:
| > I believe Google has earned the most revenue of any business
| ever
|
| Google is very large, and I'm sure Acquired framed the
| statement is such a way that it's true, but this statement as
| you presented it is false.
|
| Other publicly traded companies have reported more lifetime
| revenue. Other product categories besides internet search have
| generated more revenue.
| MontyCarloHall wrote:
| >The problem seems to be that no one has figured out what the
| network effect in LLMs is.
|
| At the very least, the exact same network effects that search
| has. The vast majority of frequent ChatGPT users I know mostly
| use it like a search engine.
|
| That said, those network effects will be massive. Ads in LLMs
| are going to be unprecedentedly lucrative. Google/Meta
| currently charge so much for ads because they have such
| enormous proprietary profiles on users based on their
| search/communication history that they can offer advertisers
| the ability to target users with extraordinary granularity. But
| at the end of the day, the ad itself is static and obviously an
| ad. LLMs will make these ads dynamic and insidious, subtly
| injected into chats in the way a real-life conversation might
| happen to discuss products. LLMs will become the ultimate word-
| of-mouth advertisers, the final level of astroturfing.
| marcosdumay wrote:
| > I believe Google has earned the most revenue of any business
| ever
|
| As people pointed, this is wrong.
|
| But anyway, Google's revenue last year was enough to satisfy
| the smallest point of the interval the article points out. And
| barely so.
|
| So if everything goes perfectly for the next 5 years capital-
| wise, and AI manages to capture Google's revenue, at the most
| optimist conditions, they will be able to break even with
| depreciation.
|
| Honestly, that is better than what I was expecting. But it
| completely different from the picture you will see in any
| media.
| dgfitz wrote:
| > As you can imagine, when you're the vendor, the customer and
| the investor in a company, there's a strong incentive to
| artificially inflate the numbers by signing preferable contracts
| that use very large numbers, and then round-trip the capital.
|
| That about sums it up.
| travisgriggs wrote:
| > This is one of those rather surreal situations where everyone
| senior in this ecosystem knows that the math doesn't work, but
| they don't know that everyone else also knows this. They thought
| that they were the foolish ones, who simply didn't get it.
|
| I don't know if it's that surreal or unexpected. There's a reason
| "The Emperors Clothes" is such a classic, enduring, fable. It's
| happened before. It'll happen again.
|
| Not shading the article. All good points, just was surprised the
| author threw this bit in.
|
| Buy more tulips.
| JumpCrisscross wrote:
| > _Buy more tulips_
|
| Railroads and fibre are better examples. Tulips are actually
| fucking useless as a productive asset. Railroads, fibre-optic
| cables, power production and datacentres are not.
| gerdesj wrote:
| "the industry is spending over $30 billion a month (approximately
| $400 billion for 2025) and only receiving a bit more than a
| billion a month back in revenue."
|
| That's called a "bubble". Obviously, this time it is different
| until it isn't.
|
| I own several books of trig and other tables, three slide rules
| and a couple of calculators, a working Commodore 64 and an IT
| consultancy company.
|
| We are fiddling with LLMs as yet another tool. We are getting
| some great results but not earth shattering.
|
| Tulips are very pretty flowers. I have several dozen in my
| garden. I have some plants that are way more valuable than tulips
| in my garden too.
| tobias3 wrote:
| On one of the latest Odd lots episodes finally an analyst had an
| investment thesis that made sense to me:
|
| They think they are building an AI god.
|
| If you think of it in religious terms it suddenly makes sense.
| Expected rate of return? One scenario has has infinite expected
| return (some kind of pascals wager/mugging)!
|
| Of course there will be no AGI. Just a planet we'll have to live
| on where those deluded idiots wasted our resources on some
| boondoggle. Maybe this kind of concentration of power is a bad
| thing? I think we are going to get to those kind of questions
| once the party is over.
| nickreese wrote:
| Wow, weird to see Kuppy on this platform. Thought it was a
| mistake haha.
| jedberg wrote:
| I've said it before and I'll said it again:
|
| The people investing in AI companies (and the big players
| spending in AI) are seeking Artificial General Intelligence
| (AGI). It's the only way they get a return on their capital.
|
| They are investing so they can get there first. Money basically
| becomes meaningless at that point, whoever owns the AGI owns the
| world. That's the only way to get a return on that investment.
| Ekaros wrote:
| In current system if you do not do actual straight up criminal
| fraud you get charged for you get to keep all the money you got
| on the way. So even if math never makes sense there is money to
| be earned for the time being. And then when it fails, well there
| is always the next scheme. And next round of people who believe
| they can extract their share on the way.
| martinald wrote:
| I think the fibre optic analogy is a bad one. The key reason
| supply massively outstripped demand was that optical equipment
| massively improved in efficiency.
|
| We are not seeing that (currently) with GPUs. Perf/watt has
| basically completely stalled out recently while tokens per user
| has easily increased in many use cases has went up 100x+ (take
| Claude code usage vs normal chat usage). It's very very unlikely
| we will get breakthroughs in compute efficiency in the same way
| we did in the late 90s/2000s for fiber optic capacity.
|
| Secondly, I'm not convinced the capex has increased that much.
| From some brief research the major tech firms (hyperscalers +
| meta) were spending something like $10-15bn a month in capex in
| 2019. Now if we assume that spend has all been rebadged AI, and
| adjust for inflation it's a big ramp but not quite as big as it
| seems, especially when you consider construction inflation has
| been horrendous virtually everywhere post covid.
|
| What I really think is going on is some sort of prisoners dilemma
| with capex. If you don't build then you are at serious risk of
| shortages assuming demand does continue in even the short and
| medium term. This then potentially means you start churning major
| non AI workloads along with the AI work from eg AWS. So everyone
| is booking up all the capacity they can get, and let's keep in
| mind a small fraction of these giant trillion dollar numbers
| being thrown around from especially OpenAI are actually hard
| commitments.
|
| To be honest if it wasn't for Claude code I would be extremely
| skeptical of the demand story but given I now get through
| millions of tokens a day, if even a small percentage of knowledge
| workers globally adopt similar tooling it's sort of a given we
| are in for a very large shortage of compute. I'm sure there will
| be various market corrections along the way, but I do think we
| are going to require a shedload more data centres.
| ThomasCloarec wrote:
| This is a crucial question that often gets overlooked in the AI
| hype cycle. The article makes a great point about the
| disconnect between infrastructure investment and actual revenue
| generation.
|
| A few thoughts:
|
| 1. The comparison to previous tech bubbles is apt - we're
| seeing massive capex without clear paths to profitability for
| many use cases.
|
| 2. The "build it and they will come" mentality might work for
| foundational models, but the application layer needs more
| concrete business cases.
|
| 3. Enterprise adoption is happening, but at a much slower pace
| than the investment would suggest. Most companies are still in
| pilot phases.
|
| 4. The real value might come from productivity gains rather
| than direct revenue - harder to measure but potentially more
| impactful long-term.
|
| What's your take on which AI applications will actually
| generate enough value to justify the current spending levels?
___________________________________________________________________
(page generated 2025-10-11 23:00 UTC)