Financial AI bubble [LWN.net]

Financial AI bubble

Posted Oct 17, 2025 12:13 UTC (Fri) by taladar (subscriber, #68407)
In reply to: Financial AI bubble by khim
Parent article: Large language models for patch review

Google and Microsoft as a whole are profitable, their AI departments are not. From what I remember Copilot operates on about 100% loss purely for inference (without counting development or anything else). Not sure Gemini has published numbers but since OpenAI and Claude have similarly bad cost to subscription price ratios I would be surprised if it was different for Google.

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Financial AI bubble

Posted Oct 17, 2025 12:22 UTC (Fri) by khim (subscriber, #9252) [Link] (3 responses)

> Google and Microsoft as a whole are profitable, their AI departments are not.

Why does it matter? It would be as silly as expecting to see profits from the web search department. AI-based search is tied at the hip with their Ads business, it's more than enough for AI to work as an attractor on Bing.com and Google.com to show more ads. And it works fine for that even if doesn't work for many other things.

Financial AI bubble

Posted Oct 17, 2025 16:58 UTC (Fri) by mbunkus (subscriber, #87248) [Link] (2 responses)

Even if Microsoft as a whole is still profitable, the huge money drain that is AI has drastic consequences on other divisions and unrelated consumers.

The one I know most about is the gaming side Xbox, which is not just a console but the whole subscription business. Additionally Xbox is the owner of a lot of game studios out there — the biggest & well-known one was the ActivisionBlizzard acquisition a while ago, but there are tons of other big ones such as Bethesda Game Studios and tons of small ones. The hammer has come down on Xbox due to AI spending: both the requirement to use Microsoft's AI products in all studios, but also to radically cut cost/improve revenue. This resulted in a lot of layoffs in various studios over the last couple of months, and some studios have simply been closed. And mind you, Xbox wasn't a loss maker, the division was profitable.

As to how it effects consumers: well, Xbox just decided to increase the monthly subscription fee for their Game Pass service, the most popular & highest tier now costs a whopping 50% more than before.

So yeah, the whole AI strategy does matter, it does cause fallout. I'd bet that if AI made at least as much money as it cost the pressure on other parts of MS wouldn't be nearly as high.

Financial AI bubble

Posted Oct 17, 2025 18:46 UTC (Fri) by pizza (subscriber, #46) [Link]

> Even if Microsoft as a whole is still profitable, the huge money drain that is AI has drastic consequences on other divisions and unrelated consumers.

In 2018 my then-employer was wholly owned by Softbank, which took a huge hit from a couple of bad investments (notably including WeWork). The edict came down to drastically cut expenses everywhere, and my ~120-person division [1] working on a "next big thing" project was axed entirely because it wasn't profitable [2]. This rug-pull came while we were in the process of securing a larger office space and onboarding several new (relocated!) hires to meet Softbank's previous edict to massively scale up our goals because they "weren't ambitious enough".

[1] of a highly profitable company in Softbank's portfolio
[2] Mind you, it's hard to be profitable when you're shut down before the planned start of volume production...

Financial AI bubble

Posted Oct 18, 2025 10:26 UTC (Sat) by Wol (subscriber, #4433) [Link]

> As to how it effects consumers: well, Xbox just decided to increase the monthly subscription fee for their Game Pass service, the most popular & highest tier now costs a whopping 50% more than before.

So a division that was already profitable, has had to increase its "cost to the consumer" by 50% to subsidise losses elsewhere. Interesting ...

What's that going to do for companies like Sony, Dreamcast, Nintendo that are not - to the best of my knowledge - that into computing and AI?

And in the face of competition, doesn't increasing prices normally result in a drop in turnover? Not what MS want ... ?

Okay MS may have bought up a lot of the studios, but suddenly studios that target other consoles will be in a buyers market for talent, it sounds like ...

It wouldn't surprise me if "the largest company to go bust" could be MS or Google - call in the administrators, sell the profitable bits, and dump the wreckage ...

Cheers,
Wol