I'm not foolish enough to say that AI is not economically viable. But these two companies specifically, OpenAI and Anthropic, just seem totally screwed. They're making great revenue, but their expenditure is unbelievably irresponsible (actually, their behaviour across the board is irresponsible). Training, testing, and marketing should not be this expensive.
I'm looking forward to the new wave of companies that will likely pick up after them, and engage in much more responsible business practices. These two have got to go.
$72B of Anthropic's loss was on the paper value of financial instruments, though. Their operating loss, including non-recurring engineering/development costs, was under $9B. That's still not great, given $16B in revenue over half a year, even if that was 15x the prior-year revenue. Future infrastructure spending is the one place that they look overexposed: $600B in promised spend over the next decade, mostly not cancelable.
- Google will win the retail/free AI space and they can afford to offer Gemini for free for ever
- Anthropic will win Enterprise AI, but at very high costs and based on the dependency of their customers onto them, after the trap snaps: I expect a Claude seat for 1000+/month
Companies are building entire internal workflows on Claude & its tooling. One day, these companies will be superdependent on Anthropic, then they can call whatever price they want (until a theoretical maximum)
I'm not foolish enough to say that AI is not economically viable. But these two companies specifically, OpenAI and Anthropic, just seem totally screwed. They're making great revenue, but their expenditure is unbelievably irresponsible (actually, their behaviour across the board is irresponsible). Training, testing, and marketing should not be this expensive.
I'm looking forward to the new wave of companies that will likely pick up after them, and engage in much more responsible business practices. These two have got to go.
$72B of Anthropic's loss was on the paper value of financial instruments, though. Their operating loss, including non-recurring engineering/development costs, was under $9B. That's still not great, given $16B in revenue over half a year, even if that was 15x the prior-year revenue. Future infrastructure spending is the one place that they look overexposed: $600B in promised spend over the next decade, mostly not cancelable.
Those financial instruments are the circular financing that's feeding the beast.
I think AI is going to be like television: a hugely important technology, that you can't make much money from.
There's not enough moat and the open models just have to be good enough for people to cheap out.
A lot of the costs are going to compute aka GPUs aka Nvidia. Guess who is funding AI startups so they can buy more GPUs.
https://archive.is/20261020220344/https://www.wsj.com/tech/a...
More discussion here from earlier:
https://news.ycombinator.com/item?id=50171966
In the long run, there will be two AI winners:
- Google will win the retail/free AI space and they can afford to offer Gemini for free for ever
- Anthropic will win Enterprise AI, but at very high costs and based on the dependency of their customers onto them, after the trap snaps: I expect a Claude seat for 1000+/month
That Anthropic bet is dubious, when such credible and often far cheaper alternatives exist. There‘s barely any lock in or stickiness here.
Companies are building entire internal workflows on Claude & its tooling. One day, these companies will be superdependent on Anthropic, then they can call whatever price they want (until a theoretical maximum)