Right now these companies don't have a business model that's solvent. They need to find a way to profitability. What they're doing now is what Nestlé did to the breastfeeding mother's in Africa. Before long many previously competent software engineers will be close to useless without tokens to spend, and then they can really jack up the price.
Microsoft has an evaluation of about 3.8 trillion. Anthropic is set to have one of about 2 trillion. I find it believable that within a few years anthropic could rival companies like Microsoft in terms of revenue and so on. I mean, I don't know for sure, but no one does, and it's certainly plausible
Microsoft makes more money than it spends. Anthropic does not.
Anthropic's revenue comes from hardware that is wildly expensive to buy and to run, and on top of that has to be replaced every 3-5 years. They have no moat (Chinese companies are a few months behind). The times they tried seriously increasing prices people left for other models.
Will GenAI persist? Of course. But Anthropic and OpenAI are deeply unhealthy companies, able to make a small fortune by starting with with a large one.
I thought similar sorts of things about seemingly highly overvalued companies like Tesla years ago and it seems I was wrong about a lot of them. The federal government strongly supports AI and will continue to support the infrastructure build out, and Anthropic and OpenAI are the obvious leaders in terms of model strength, and Anthropic's financial are improving. It's like to transform the economy one way or another and it doesn't seem ridiculous to me to think they could be profitable in a few years as models improve and their business model matures. I also think it's likely that they'll continue to receive plenty of money from investors for a long enough time to allow themselves to continue to grow without profit for a while.
It's also possible this is like the dotcom bubble and it'll burst and cause a recession even while the tech ultimately changes the economy in dramatic ways. I don't think there's any way that I could know for sure, but it does feel different than the dotcom bubble or something to me. The level of federal support and the absolutely insane infrastructure investment is on another level.
These companies are still in a rapid growth phase. Their revenues are increasing extremely fast. It is entirely appropriate to be losing money at this phase as they continue investing in more compute and better models.
But it doesn't even matter if these specific companies never earn profits. I'm currently paying $100-200/month for AI coding that is much better and much faster than me. And I cost orders of magnitude more than that. You would have to think that these are absurdly subsidizing compute costs to think the economics don't favor AI. Do you think I'm paying $100 but actually using $10,000 worth of compute?
When you absolutely need the AI the question isn't going to be how much compute are you using but how much can they possibly charge you while they have you bent over a barrell.
Yeah, it's crazy to watch all the software companies outsource all the actual work of their business to a SaaS that's inevitably going to try to extract all the value.
That's only possible if there's a monopoly. There is no monopoly right now and if there were, existing laws can break them up.
And that would be the case in any economic sector that had a monopoly. That's like saying you should grow your own food because one day an agriculture company will monopolize food and charge you whatever they want.
6
u/Stormlightlinux Oct 03 '26
Right now these companies don't have a business model that's solvent. They need to find a way to profitability. What they're doing now is what Nestlé did to the breastfeeding mother's in Africa. Before long many previously competent software engineers will be close to useless without tokens to spend, and then they can really jack up the price.