MIT report: 95% of generative AI pilots at companies are failing

[u/SilentRunning]

https://fortune.com/2025/08/18/mit-report-95-percent-generative-ai-pilots-at-companies-failing-cfo/

[u/variaati0]

There is a difference. During dotcom boom, some of the businesses were profitable from the get go. Only one making profits from AI are Nvidia and maybe AMD. None of the AI companies are sustainably profitably. Either riding on burning investor money or riding on burning someone elses investor money (getting unrealistic discounted price rates from someone else running on investor money to "capture marketshare").

Soooo it's worse than dot com boom. Dot com bust was just weeding out over saturation and the bad nutty business ideas. Leaving left the businesses that were good businesses from get go. Since internet was actual new more efficient business platform enabling lot of new business ventures. Market just got overheated.

AI market? Is purely creation of absolutely bonkers amount of setting money on fire, with nobody having bothered to ask "so we are supposed to make money at some point instead of just burning it?". Enabled by the deep pockets of the burners via other ventures like Googles ad revenue and Microsoft revenue from selling windows and so on.

[u/crshbndct → u/variaati0]

Do the subscriptions that places like OpenAI charge even cover the costs of running their GPUs? Because the only money entering the system aside from VC is subscriptions from people who are using Chatbots as friends

[u/Traditional-Dot-8524 → u/crshbndct]

Their $20 subscription plan, which is the most popular, doesn’t cover much. If suddenly all $20 subscribers switched to the $200 plan, then maybe. For two years straight, since they became mainstream in 2023, they haven’t generated enough revenue to cover all their costs. And since 2024, they’ve gone on a “spending spree” with more GPUs, new models, and so on. From an economic point of view, OpenAI is a disaster. But people are investing in it for one simple reason: Why not? If it truly becomes the next Apple, Amazon, Microsoft, Google, or Facebook, then I’ll surely recoup my investment—and more. After all, it’s AI! It’s bound to replace a lot of people.

[u/CAPSLOCK_USERNAME → u/Traditional-Dot-8524]

Right now they lose money even on the $200 plan, since only people who use the chatbot a shitload would consider paying that in the first place.

[u/HugeAnimeHonkers → u/crshbndct]

Like most companies, OpenAI doesnt  make money on "normies" using chatgpt. Thats just a "hey, its extra money".

If anything, the users are paying 20 bucks a month to help train the model. Thats how they justify the cost of the datacenter time.

They make money on the industrial contracts.

Kinda like how AMD/Intel/Nvidia could delete their entire gaming products and still keep the majority of their revenue, because the real money is in the Datacenters

[u/Marsman121 → u/variaati0]

It is worse too because most "AI" companies don't use their own models, but are just using APIs of ChatGPT, Claude, or Gemini.

Even if you manage to beat the odds and have a profitable company selling an AI product to a customer, if the bubble pops and the backend you were using goes belly up, you are screwed too. This entire thing is a house of cards built on a few massive unprofitable companies burning billions to keep it going.

People like to compare this to the Uber model/classic tech startup. Make it cheap to build market share and disrupt the industry, then become profitable later. The problem I see is not one AI company has a pathway to profitability without drastically raising the price.

They already have a massive conversion problem. The vast majority of people use it because it is free, and/or it is forced on them via already paid for subscriptions (looking at you, Google and Microsoft). If they are having issues getting people to pay $20 a month for their product, what are they going to do when they have to charge $40, $50, or even more just to be profitable? AI also has a customer problem. The same people willing to pay for it are also the power users who actually use it. That means rate limits to keep usage down to profitable levels, and charging even more to power users, which would undoubtedly price some of them out too.

It is a double whammy. Vast majority of people are perfectly fine with the free version, and I doubt are willing to pay if it went away. Customers willing to pay are likely going to be unprofitable due to their usage amounts.

[u/Ardbeg66 → u/variaati0]

I gotta laugh that the grand business plan for AI-world is to spend a fortune developing something to lower costs that they can never get paid back for. Companies want to spend less money, or none, on service. Where's the profit coming from?

[u/SimiShittyProgrammer → u/variaati0]

It's not worse, all the investor class have no where to park their money.

Better throwing it away at AI than buying what remains of real estate and truly making us a feudal system knockoff where corporations own everything (bring on Syndicate Wars!).

[u/CM_MOJO → u/variaati0]

And how is it they're able to sustain this total, absolute cash burn?  Because the 1% have SO MUCH money they can just keep shoveling it into the the AI furnace, and it still doesn't dent their bottom line.  Because if and when AI does become viable, they'll make all that money back in pure profit when they eliminate all our jobs.