{"id":801617,"date":"2026-10-13T21:06:10","date_gmt":"2026-10-13T21:06:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/801617\/"},"modified":"2026-10-13T21:06:10","modified_gmt":"2026-10-13T21:06:10","slug":"cheap-chinese-and-open-source-llms-could-trigger-trillion-dollar-ai-infrastructure-reset","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/801617\/","title":{"rendered":"Cheap Chinese and open source LLMs could trigger trillion-dollar AI infrastructure ‘reset’"},"content":{"rendered":"

<\/p>\n

\n paas and iaas\n <\/p>\n

<\/a><\/p>\n

\n Jefferies wonders if LLMs will ever be
\nprofitable during the ‘ongoing collapse in token pricing’\n <\/p>\n

A financial analyst is questioning whether the collapse in AI costs owing to the arrival of Chinese, low-cost and open source models will cause a \u201creset\u201d in the AI story as cloud providers struggle to recoup trillions of dollars of capital spending. <\/p>\n

In a recent research note focused on Asian markets, Jefferies estimates that about half of the roughly $2.3 trillion contracted backlog at\u00a0Microsoft, Alphabet, Amazon and Oracle is owned by OpenAI and Anthropic. Yet Chinese AI models,\u00a0open source\/weight and small language models, threaten to undercut the prices the two US leaders charge,\u00a0casting doubt on their future revenue.<\/p>\n

Jefferies points to research from global aggregator platform OpenRouter, which found Chinese models processed 76.12 trillion tokens in the week ended 27 September, up from just 4.37 trillion in late April. The top four US providers processed 14.2 trillion tokens. Meanwhile, the launch of Moonshot AI\u2019s open source Kimi K3 is \u201ccompeting at the frontier\u201d with an estimated 95 percent of the performance of Anthropic\u2019s Claude Fable 5.<\/p>\n

\u201cThe question now is whether all of the above has been priced fully into markets. This writer does not think so,\u201d the Jefferies paper states. <\/p>\n

The largest hyperscalers are set to collectively spend between $600 and $800 billion this year on building datacenters, funding it increasingly with debt rather than cash. Jefferies, however, questions where the hyperscalers’ future revenue streams will come from. <\/p>\n

\u201cIt can no longer be assumed, most particularly with the arrival of the likes of Kimi K3, that large language models will ever be profitable given the related ongoing collapse in token pricing. This is extremely relevant for the hyperscalers since they have invested in datacenter capacity on the assumption that the compute will be purchased by the likes of Anthropic and OpenAI,\u201d the paper says. <\/p>\n

While the long term bet on AI may be sound, in the medium term, there is a lot of uncertainty, it argues. \u201cThe AI story will be due for a big reset at some point in the not-so-distant future. Are the four hyperscalers really going to spend $993 billion on capex in 2027?\u201d Jefferies questions. <\/p>\n

There are also important questions to ask about how much of the hyperscalers\u2019 reported profits are down to their investments in AI model builders on which they will also depend for revenue. \u201cOther income and expenses\u201d \u2014 which describes gains in investments \u2014 have spiked in importance. Jefferies says these investments are \u201clikely to include positions in unlisted AI-related stocks.\u201d<\/p>\n

While the four major hyperscalers\u2019 annualized earnings increased by $222 billion to reach $581 billion in the four quarters to 2Q26, \u201cother non-operating income\/loss\u201d accounted for all of that increase, according to the analyst.\u00a0Jefferies says \u201cother non-operating income\/loss\u201d increased by $224 billion year-on-year to $237 billion over the same period, meaning it accounted “for all of the increase in earnings.”<\/p>\n

Other research has underlined how much revenue and borrowing cloud providers might need to fund their datacenter building plans. The 2026 annual Global Technology Report from management consultants Bain & Company says the AI industry must generate $6 trillion in annual revenue by 2031 to keep funding the infrastructure needed<\/a> to meet anticipated demand. That means the industry will need new uses beyond employee productivity.<\/p>\n

Bain suspects existing AI applications might make up $1.8 trillion in revenue, but this still leaves a $4.2 trillion shortfall. It could be plugged by emerging AI applications such as search engines and ads, AI-built autonomous vehicles, and AI simulations. Even if they work out, these new categories will only add up to $1.5 trillion in revenue, leaving a $2.7 trillion gap which might be filled by \u201cnew products and uses that don\u2019t exist today.\u201d<\/p>\n

The Register does not offer investment advice.\u00ae<\/p>\n","protected":false},"excerpt":{"rendered":"paas and iaas Jefferies wonders if LLMs will ever be profitable during the ‘ongoing collapse in token pricing’…\n","protected":false},"author":2,"featured_media":801618,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[554,733,4308,86,56,54,55],"class_list":["post-801617","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-technology","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/801617","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=801617"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/801617\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/801618"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=801617"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=801617"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=801617"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}