I guess this is true for most tech, but with LLMs it seems to be at a pace that just doesn't feel worth it to invest knowing someone else will just leap over your investment soon, and that in a year or two, when you want some return (maybe longer), that your tech might have completely stagnated and completely left behind by everyone else's. I dunno, just a weird thought.
With Elon companies investors hope that the market will behave just as irrationally as with Tesla.
With other companies they hope that they will be bought up by bigtech.
Customers can easily jump ship. Everyone is using effectively the same compute, nearly identical training data, very similar algorithms, etc. Worse past investments in a model become outdated quickly.
https://arstechnica.com/tech-policy/2025/07/xai-gets-an-air-...
I wonder how investors have priced in their regulatory situation.
They bought a cargo ship worth of GPUs though
The average subscriber to these services isn’t following a constant stream of LLM news and jumping from platform to platform every time the leaderboard changes slightly. The average customer signs up and then inertia and familiarity take over. They stay signed and comfortable.
It explains OpenAI’s valuation but no one else
I expect, whether OpenAI is even still around in 15+ years or not, that my grandparents will continue telling me about "that ChatGPT" well into the future.
4.5 is also great for certain things. Of all models, it's the second best writer. (DeepSeek R1 is the best prose stylist, surprisingly!)
[1] - This is Grok 4: https://x.com/i/grok/share/e51O9rK0W7UaIN81nFBQoJDSs
This is o3-pro, same question: https://chatgpt.com/s/t_68710185cf04819185dc25233280e46b
o3 made fewer mistakes and drafted a more neatly structured and better written output.
If winning the LLM’s game long term means the product needs to compete on cost and be the best to win, that’s not going to be nearly as profitable in the near term.
But when the price is non-zero, that gives another dimension to compete on, and monopolies without significant barriers are much less common. It looks like good LLM's are going to have a price tag, so a monopoly is going to need a moat.
In terms of AI coding assistant, almost every product out there allows you switch to a different model with a single click. If Gemini is not giving you the answer you want, what do you do? Switch to Claude and bang you have it.
The only thing that has some stickiness is products like ChatGPT. But that's so much more than just a model -- it's a product with many features smoothly integrated.
xAI does not currently have any product that is sticky for the average user.
Err... What about twitter? Where it is firmly embedded. And Telegram recently has been paid to do the same.
Machines with LLM acceleration hardware are barely coming out at this point. I think it is early to expect people to really be stuck to anything.
OpenAI also announced their own web browser too.
None of these companies will survive if they don't own multiple parts of the stack. As deep as possible, to the hardware if they can. That's why Anthropic is investing heavily in Claude Code, and why OpenAI is looking at hardware. You can't just build models and sell tokens, yet that seems to be Grok's entire strategy right now [1]
Leaving aside the controversies, Elon is one of the best players at capitalism there has ever been. As per his wealth. And to think you and I know more than someone with a deep network of Investors and fellow CEO's would be a bold claim.
I think this arrangement is probably the future of LLM usage, and it does not bode well for everyone betting the farm that their model will be special.
Google is still managing an outrageous domination.
Being percieved as the best is still a huge headstart. 99% of the population is not using “last weeks llm that topped AIME and ARC-AGI“. They are using “ChatGPT” with the default model selected.
People are going to switch when “their tech friend tells them to switch”. The same way they switched from internet explorer to chrome. Once you reach that position you can afford being “not the best but good enough” for a long time.
xAI needs to convince investors that: OpenAI is struggling so there is an opening to take the crown and be popular enough to get people to switch. They have twitter to help make that happen.
And they need to convince that no one else is going so much better than they are anytime soon; they just need to be good enough
Funny, because the OpenAI models are not the first or even second choice for anyone I know who uses Copilot for coding agents. Anthropic and Google are absolutely stomping them in this space.
Search engines are pretty different from LLMs, in any case: they all have different UX right in your face, different functionality, etc. The LLMs simply generate text, that's all they do, and the differences are far more subtle.
Now imagine you believe that this AI company might eventually deliver AGI, or even a Kurzweilian superintelligence. It would be easy to justify a near-infinite dollar value on that best-case outcome. And, of course, a possible outcome with infinite value confers infinite value on the investment as a whole, as long as its value is non-zero.
xAI > LLM
mission > product
Me too, but what shocks me the most are the insane amounts of money that are being moved. Does the tech really cost or has that value? Why always the ridiculous amounts?
Too much money with no place to go?
I think everyone is betting on making a good product and convince enterprises to buy from them, this is where you can get sticky customers
I believe what investor's are chasing in LLMs is the same thing that Zuckerberg was chasing in the metaverse: not a new "technology" a new medium. The key insight in the development of the web was that a few companies can effectively control the entire thing (at it's peak both FB and Google basically had their tendrils on every page out there).
Apple's mobile play showed that their seeing the value in the fact that mobile was a brand new medium early on. This lead them to having control over a market that Google had some play in, and Facebook really couldn't get a hold on.
LLMs represent a new opportunity. The answer to my friend's question is very likely: "Because they eventually want to sell you the book through them". Sure there's not much of a moat, there wasn't much of a social media moat back in the day either, but eventually there will be a few winners and those winners will divide what may very well be the next "mobile" or even "web".
I already spend more and more of my online time chatting with Claude about various thing, most of the books I've ordered in the last few months came from conversations with Claude. I can absolutely imagine a world where AI is how I accomplish most of my purchasing, precisely because right now AI is not rotten with SEO spam. That will of course change, but likely not in exactly the same way the web changed.
There's a very likely future where Claude/ChatGPT/DeepSeek become iPhone/Android/Huawei, what investors are hoping is that they can make it Claude/XAI/DeepSeek (or some variant), because owning a piece of that can effectively be even bigger than owning a large amount of stock in early Amazon.
How much do I pay to make it recommend my book, rather than your book?
The early days of Google felt very similar to the current state of LLMs. The web at the time was filled with the laziest keyword spam, search results where awful. Then Google changed all that (hard to even imagine today): you nearly always got the results you wanted without garbage. Early Google fought spam pretty aggressively, old time HNers might recall when the Genius lyric site was caught gaming the system (more aggressively than standard SEO) and was permanently punished in Google results. Similarly early Facebook was actually pretty pleasant, just a way to catch up with old high school classmates, I don't even remember ads in the early versions.
My guess is LLMs will follow a very similar path, but because it is a new medium it won't evolve in exactly the same way. I suspect once the major players are established there will be no more SEO, but rather major advertising agreements behind the scenes. One nice thing about SEO is that anyone could do it, sadly I think we'll soon be back in a world where only big players really matter.
To be clear, I don't have any fantasies that "this time it will be better!" I'm pretty certain we'll see the same enshitification cycle play out, but I'm trying to enjoy at least being on the less-shitty part of the cycle for a moment.
Kagi gives that feeling too and is much faster than any chat bot there is…
Yeah its only one somewhat specialized source, but its a big one. The only time anyone talks about Grok or xAI is their now-annual accomplishment of taking the intelligence crown, for about a month, before OpenAI comes out and beats them, then Anthropic comes out and beats them, then Gemini comes out and beats them, then DeepSeek crashes the stock market because china scary, then we repeat again. These things are so damn fungible now that it startles me that any investors would touch any of these companies at their current valuations.
The future where Claude/ChatGPT/DeepSeek become the next iPhone/Android/Huawei is only going to happen if these companies make hardware and traditional software operating systems. OpenAI is trying. But, by the way, one of those companies on the right side is already doing that and has a world-leading AI strategy (Google), so I'm not convinced the status quo is as disruptable as some people think.
LLMs were already the hot-shit new tech that was attracting a ton of excited talent. What’s xAI got to offer that OpenAI doesn’t? Training off a mediocre social media network I guess.
LLMs are more like web browsers. Nobody makes any money there, they are commodities. Look at Netscape and Firefox. Edge and even Chrome.
> These rumors are false. xAI is not seeking funding right now. We have plenty of capital.
For more generic AI it won't be just about the models. It's also about access to data. Everybody is closing the gates to content. xAI is in interesting position because they have all the data in X. X is great source when you want to know what is happening in the world. And they have also a deal with Telegram (although I'm not sure to what data they can access).
And even if the models become commodity, I don't think they will be worthless. Plenty of companies make big money on selling commodities. If AI delivers, selling access to the models should be a business opportunity of the century. Even if margins would be low, the business will be huge and infinitely scalable.
If xAI can pull this off, it holds massive potential for passive income and a large user base—even if it's not the best LLM. Success in integrating with robotics and vehicles could secure long-term contracts, licensing deals, and infrastructure partnerships. The market rewards utility, not just raw intelligence.
andsoitis•6mo ago