He is the article:
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Blackstone told investors Anthropic may not receive an investment-grade rating immediately after going public, a reversal from its previous guidance that would complicate the AI lab’s ability to finance its massive spending.
The private capital giant told investors in Anthropic’s latest $63bn chip financing deal that the start-up is expected to receive a “high” junk rating from major credit rating agencies after its initial public offering, according to people familiar with the matter.
Blackstone is acting as an anchor investor on the deal, known as “Project North Star”, and is working with banks that stumped up financing on selling the debt on to other investors.
Anthropic filed to go public on Monday, setting up what could be the largest listing of all time next month. The AI lab’s prospectus sketched out its “bold but sane” plans to spend more than $800bn on computing infrastructure between now and 2045.
While Blackstone had told its investment partners in recent months that it was expecting an investment-grade rating for Anthropic before year-end, it has recently signalled that a rating in the double B range or above is more likely given the guidance it has received from major credit agencies, the people said.
Such a designation would limit the pool of capital that Anthropic could tap because many insurance and pension funds are restricted from taking large positions in junk-rated borrowers. As a result, the company might need to continue to rely on its suppliers with high credit ratings to support its debt-raising efforts.
US tech stocks slid to session lows on Friday following the FT’s report on Anthropic’s rating, with the Nasdaq 100 down 3.7 per cent in afternoon trading. Markets were sharply lower prior to the report after earnings from Amazon and Intel worsened fears about the sustainability of the AI boom.
“It’s all about access to credit, it really matters . . . if [Anthropic] isn’t investment grade, the cost of credit goes higher, that’s not good for anyone,” said a US tech-focused portfolio manager.
“It’s a bloodbath out there,” they added, referring to the sell-off in stocks.
Wall Street banks earlier this week closed the North Star deal, which provides the financing for Anthropic to lease 1.5 gigawatts of Google’s semiconductors. More than $42bn of the senior loans is guaranteed by Broadcom, which co-develops the chips and has an investment-grade rating, while $18bn of the junior debt is backed by the AI start-up’s lease payments.
Institutional investors covet senior debt because it takes priority over junior loans in the case of a default. Broadcom’s high A-tier credit rating was an important factor in allowing Anthropic to secure the financing.
Blackstone’s funds invested in $9bn of the junior debt at a lucrative yield of more than 10 per cent, the FT previously reported. Bankers for Anthropic and rival OpenAI have also lobbied the largest rating agencies to grant the AI labs investment-grade ratings after their IPOs.
Project North Star’s $18bn junior debt, which exposes lenders more acutely to Anthropic’s credit risk, has been assigned a double B plus rating with positive outlook from Kroll Bond Rating Agency, a slight improvement from stable outlook in a similar deal known as Project “Big Sky” four months ago. It also received a double B rating from Morningstar D...
> Wall Street banks earlier this week closed the North Star deal, which provides the financing for Anthropic to lease 1.5 gigawatts of Google’s semiconductors.
This line is certainly eyebrow-raising to the educated layman.
Apparently it means that anthropic is leasing a Google data center whose constituent servers draw 1.5 GW of power running representative workloads.
It's interesting you imagine nine shares would suffice for a large site like HN. No, the link doesn't work for me. Honestly, this kind of "sharing" seems a bit disingenuous at this point.
I’ve discussed with many people at work, all engineers, they’re weirdly oblivious. Most are shocked when I say things like OpenAI and Anthropic are gonna crater.
There’s a notable difference between saying those companies may crater, and predicting confidently that they will crater. The wording of your comment makes it seem like a foregone conclusion.
I still think OpenAI holds on as a Google competitor and Anthropic does fine as a business tool. Do they match their outsized spending with future growth? Well, that I'm not very confident about. A lot of this really comes down to what is the business model of integrating AI with 3rd party systems and I don't see that anyone has truly cracked that yet.
I also speculate that OpenAI and Anthropic will crater, but I also expect that the market will remain irrational much longer then anyone shorting it today will remain solvent.
So yes, I believe it's going to leave a smoking hole in the ground, but I won't be betting money on it.
It's the cryptobro craze but for AI. It's tiresome, I don't have AI fatigue, I love using Claude, I have aibro fatigue. I'll lump in the people all in on AI, and that includes anyone who hates it vehemently because they just have to sour conversations.
Yeah. AIbros and AI companies are SHOCKED that AI and datacenters are unpopular.
But guys, if your companies weren't run by psycopaths and weren't promoted by assholes who appear to be the exact same guys behind the NFT craze, (this is the future of creative expression! Don't like it? Your a luddite. Cope.) and weren't predicting horrible nightmare scenarios based on their tech maaaaaaybe people would like AI and be more interested in using it?
I personally see that generative AI is a very powerful and useful technology but I hate everyone involved in it and do not want to see them succeed because they're icky people.
Its like if the nazis had discovered how to harness atomic energy before anyone else. Fuck that.
I talk to our risk lead and he was also weirdly oblivious as well. The whole company is dependent on them not going down the shitter. Surely that's a tangible risk?
I'm indifferent either way myself. It's just shocking the amount of ignorance.
People have a hard time detaching the tech from the business. That a successful and revolutionary tech paradigm isn't necessarily very profitable. I think these LLMs are fantastic but they're race to the bottom commodities that are terrible from a profit standpoint and they're expensive to run with high capex requirements.
Not sure about Anthropic, unless they continue to fall over themselves in ego. They have strong GTM in my take.
Google is a bit oblivious (though is probably the smarter money based on diversification alone IMHO). OpenAI has folks wondering just how publicly Mr. Altman can blunder his wording before he gets ousted (today was along the lines of "you will own nothing" with his take that personal RAM ownership being an affront to efficiency).
All three are trying to convince enterprise buyers that central tokenmaxxing is the best thing since sliced bread; many of the circles I run in occasionally have huge (emphasis: huge in the 2010s ZIRP sense) buyers that are begging for more edge AI.
The world is using 300T token a day. Barely anyone is using AI. This number would grow 30x. If there is anything, Google, OpenAI, Anthropic are undervalued by a great deal.
There’s no business in tokens. Zero. The only business is selling compute and Anthropic rented all its compute.
Structurally there in a terrible position on what’s unfolding now with the completely collapse of model valuations. With truly “open” models gaining more and more momentum models are basically worth nothing and “token” prices are collapsing to the cost of compute. That doesn’t leave anything on the table for the Anthropic and Open AI’s of the world.
Yeah, nobody is doubting that people want to consume tokens. We're doubting that that Google, OpenAI, or Anthropic has a significant enough moat to keep people buying their tokens there. Over the past couple years the moat has been the model. As open models are getting better, that moat is drying up. Eventually the market for "tokens" will converge with the market for compute, which is a commodity with little to no moat.
I think even if the moat dries up, you could think of tokens/inference similar to compute. There's all the open source tooling available in the world for you to rent your own bare metal servers/racks and use a white glove service, yet there is demand for cloud.
At current prices, it makes sense to self host, but if the price goes down and the demand grows across different verticals, there is room for this business.
Everyone I know and their mom is using AI, technical or not. The question is, is it profitable to run a frontier AI lab and sell inference while spending billions on R&D.
Anthropic could be super profitable right now if they stopped developing new models. But then they'd quickly fall behind because there's not much of a moat. Maybe the only ones who will survive this are huge companies like Google with separate incomes who can swallow the cost of staying on top.
Many companies IPO'd in the late 1990s and did not exist 10 years later.
Let's say that the house of cards crashes down and takes the market with it who will shutdown, survive or have no choice but to get acquired for a 90% discount.
Some will be just alive long enough for the early investors to pull out enough before the market crashes.
And who will be the Amazon and grow 2500x over the next 30 years?
Now, I'm not saying that's going to happen -- but if you take analogies from the dot-com era and assume they're going to play out in the same way, you can't just cherry-pick the bad ones.
None of the current vintage of IPOs are going to 2500x in our lifetimes (inflation adjusted at least..). The VC to IPO process is totally different now.
Companies are staying private longer, raising many orders of magnitude more private funding, and IPOing straight into "top 10 biggest companies in history" size.
If you IPO at $1.5T you are already equivalent to ~1.5% of World GDP.
Thus is just for scale, as comparing GDP vs a company market cap doesn't make total sense since GDP is 1 year economic activity and market caps represent discounted future cashflows of future economic activity...
Let's say Anthropic IPOs at $1.5T and grows even 1000x over 20 years, it would be worth $1.5P (petabillion?). If it had a 20x earnings multiple like google this would imply Net Income of $75T. Mag7 total Net Income for 2025 was $500B or $0.5B.
World GDP is $125T, and has grown less than 5%/year before/thru/after DotCom. So lets say in 20 years its $250B and Anthropic is capturing 30% of world GDP in earnings (not revenue, that would be even higher)!!
Amazon had valuation of $60M at their first venture round, and it took them 19 years to 3500x it to $200B.
Anthropic had valuation of $550M at their first venture round, and assuming it IPOs at roughly $2T, it will take them 5 years to give this 3500x return to their initial investors.
Same thing as with SpaceX. If there is that much of an equity buffer, it should be investment grade.
That it isn't means that the bond market doesn't trust the valuations at all.
Anthropic won't let people make video games. They are on the wrong side of history.
They are so going to get disrupted. Chinese open weights models will have no such limitations, and there's no way we'll let Anthropic outlaw or ban them. (And even if they did, they can't police the whole world.)
There is no moat. Anthropic should be playing nice, not trying to create a god while holding engineers under their thumb. We will route around it.
People got upset that Anthropic added rejection rules for people saying "Make Pokemon in Elden Ring" . You can still make games, as long as you aren't telling Claude to recreate a specific, IP-protected game.
Anthropic is in the worst position of the AI labs. As far as investors and "the market" are concerned, the only AI that matters is the one built into your phone, car, your TV, your smart home and appliances. Anthropic has none of that share. It's all Google, Apple, and OpenAI powering Siri.
Personally, I don't think that tracks. If you are measuring "share" as share of vibes or "AI adoption" sure, but having AI in a phone, TV, smart home, etc doesn't make anyone any significant money. Hyperscaling isn't happening because there is an insatiable demand for retail AI usage. People are subscription'd out. A significant portion of people don't want AI in a lot of these things, another portion don't think they need it, and the ones that are eager to adopt it can use AI to bootstrap AI tools they use through a token router. You will have some revenue from retail AI but that isn't surprising considering I quite often have to provide tech support to people to help them cancel their subscription to a calculator app they've been paying $20 a month for.
That's very true but unfortunately Anthropic have locked in contracts for so much compute that they absolutely need to expand beyond the corporations currently paying them.
Realistically they need to 3x their revenue to pay for their compute. While that's plausible, I'm not convinced that it can all come from developers. Many many developers are already using Claude. I think they need consumer, or some other market too.
An IPO is where the investors cash out to spend money on something else. It’s where the founders and early employees get rich enough to start chasing other interests, or just retire outright.
That certainly comes with the territory. However, being a public company offers a lot of opportunity for the company - easier access to capital, to enterprise/government contracts, and attracting talent that want less risky compensation.
That makes sense, anthropic is in a rapidly changing market. Revenue could crater if a better model is released by a competitor. AI demand could fall behind. Doesn't seem like that will happen, but its definitely not investment-grade debt worthy either.
Demand is currently not sustainable because they - ant and OAI - refuse to raise prices.
Infact they’re going to end up in price competition unless they field an army of ‘FDE’ who go to every large firm and reorganise the operations around their models and displace labour.
I was under the impression this was only on the consumer side? I have heard of contracts expiring and them wanting a lot more money now (forcing from generously subsidized enterprise seat plans to all API usage). Specifically Anthropic in this case.
GitHub copilot then comes in and offers multi provider support including open source models, and gets the contract due to Microsoft’s existing establishment and lower price point.
Anthropic can’t raise their prices without loosing market share of Claude code
Even if Anthropic invents a godlike frontier model that can do anything, it feels like they won't have a moat for very long before competitors like DeepSeek offer something almost as good for a fraction of the price.
If AGI is created, then it will be used by someone else to create a cheaper AGI, making the finances of the person who borrowed trillions to create it in question.
An extremely hypothetical experiment but what if this is some sort of MAD (Mutually Assured Destruction) and in our timeline, we have accepted it with AI.
Deepseek can do MAD on Anthropic and release open weights model (which means that they might not earn the most or basically burn millions/billions to then give us all essentially the same thing and we would all be on equal footing, oh they also released their inference engine right now.)
This might explain why the stock market got into an bubble and is fearing itself right now.
Mutually Assured Commoditization. (Credit where it's due I pasted my comment to Chatgpt and it gave me this term ironically and it seems to fit well to the comment that I am writing, I might write a blog about it someday.)
MAD / MAC assumes everyone has the same leverage on each other- that they are all as heavily invested in capital.
Where it falls apart is when you get companies that take open models, rent compute and sell tokens at a profit, without heavy investment into research or training. They spend way less, and if they can keep distilling the frontier models, they can produce reasonable products without the massive losses of subscription plans. In your example, DeepSeek et al aren't nearly so vulnerable. There's nothing mutually assured.
It is much more of a classic race to the bottom. Every new frontier model shifts the goal posts a bit, but eventually the house of cards will crumble - or at least, that's what the market seems to be thinking will happen.
Amazon didn’t borrow anywhere near this much. They also had the sales tax loophole that let them outprice the competition and take their market share for over a decade.
Right, OK, but then that's the interesting or newsworthy claim, not the company's ratings status --- junk status for companies that later went on to become among the most successful in the entire marketplace is not unprecedented.
There are some similarities between Anthropic (or OpenAI) and WeWork. Obviously the large difference is software but there is a whole lot of leasing hardware going on (neither frontier lab owns any infrastructure as far as I can tell), long term capital commitments, short term monthly subscriptions, no real moat for the frontier labs (or a hip office rental space), etc.
I think 2027 will be when a lot of companies revisit their AI spend and ROI. Have there been measurable business benefits reported by the media outside of programming?
Nothing solid. All the reporting I see is that numbers are measurable but not on the level many people expected, and that these systems are proving incapable of wholesale replacing employees, which clicks with my own knowledge of some large layoffs accompanied by press releases about streamlining corporate structures using AI and the outgoing employees asking “what AI?” Because they didn’t train an offshore team or document their department responsibilities before being let go.
My suspicion (and many others as well) is that AI is used as a way to cover for large corporate restructuring in the face of money no longer being available for “free” due to interest rates.
ChatGPT became publicly available in November 2022, and Claude followed in March 2023. It's year 4. It's foolish to think we know who the big names will be 20 years down the line, which is the kind of timeline bond investors are thinking about. A lot of people probably wish they could have invested (or invested more) in Google or Facebook in 2006, but they are probably very glad they did not invest in Yahoo or MySpace (or Friendster or Tumblr .. you get the idea) at the time, despite looking very promising (MySpace was beating Google on pageviews on some days in '06 and '07). Instagram and Snapchat and TikTok and WeChat didn't even exist yet.
My favourite example is amazon.com and pets.com. In hindsight amazon looks like an obviously good investment and pets.com doesn't, however amazon was heavily invested in pets.com itself.
your point is well-taken enough, but the idea that a sharp investor was investing in Yahoo or Myspace in 2006 is a bit silly. Myspace was bought out in 2005, and it had been dead for years before that. and I don't think I had gone to yahoo.com for any reason other than testing my internet connection anytime in the prior 10 years before that. also, investing in Google or Facebook back then would be enough to retire on, much less had you invested in a basket of tech-but-not-obviously-dead-tech stocks. from what I recall from that era, the one things I knew for sure at the time were (1) Google is gonna be around in 20 years, bigly and (2) Facebook might be DoA in terms of social media endgame, but operationally they are very strong and executing.
what I really push back on is the idea that there are magically going to be all sorts of entrants into the space that meaningfully compete with Anthropic or OpenAI in the near or even medium term. for as much as the reddit set continues to put their collective heads in the sand while screaming "there's no moat"... there is a moat, and one so prominent as to be self-evident. not once has an open-source model come even close to genuinely reaching frontier performance for anything other than cost, and cost is by definition the easiest thing to improve on-- just distill bigger model into smaller model: boom, cheaper!
I disagree, Yahoo was actually seen as a technological leader and, unlike Google that was purely a search engine in its early years, Yahoo was a full platform that seemed poised for a while to become a landing page for the internet.
When it comes to AI there simply isn't a moat - Anthropic would be my best guess out of the current entrants due to them trying to construct one via value-adding code assistance tools that might create enough friction to prevent customers from jumping ship but the models themselves are a commodity that depreciates extremely quickly. If you want to retain the frontier premium you need to constantly be improving due to the ease of distillation.
>Myspace was bought out in 2005, and it had been dead for years before that.
Myspace's peak popularity (in terms of monthly unique pageviews) came in 2007. Yahoo was ahead of Google for several years, though I am struggling to find good data on the specifics there. Your understanding seems to be based in your own personal experience of those sites, which is fine, but I don't think it quite matches the big picture.
Your proposal that there won't be any new entrants is puzzling to me because, in the grand scheme of things, OpenAI and Anthropic ARE new entrants. The entire space is new. It feels like ChatGPT became public eons ago, but it hasn't even been 4 years. Imagine saying in 2008 that no photo-sharing site would ever surpass Flickr - it's been dominant for 4 years! Why would you go to something new when everyone's photos are already on there?
One absolutely enormous advantage new entrants have in the AI space is that they can start on third base. Anthropic had to spend billions and billions of dollars to get to Opus 4.6. A new entrant could distill its way into a model roughly on par with that far more cheaply, and spend its VC cash on things like marketing and price cutting rather than burning it on actually creating a good model. The existing players need to service mountains of debt and are locked into deals for compute based on outdated assumptions about efficiency. I'm not saying it would be EASY for a new entrant to waltz in, especially to the enterprise market. But it's not impossible especially on the consumer side: Meta was essentially a non-factor until Muse came out, and now most people think of Muse when they think of an AI agent (as opposed to Claude, which is just a chatbot in the public imagination, because that's what it was when it became popular).
anthropic has come up with a lot of the core successful consumer facing tooling/standards around ai.
they invented mcp, terminal coding agent, context files like claude/agents.md.
I have no real clue whos going to win the model race but they have repeatedly shown that their internal taste is on point, reminds me a lot of early google.
It would make sense that they'd be considered high risk borrowers.
But that won't stop them from issuing bonds or more convertible notes as they have and the market may or may not bite.
It does add pressure to their IPO proceedings being as high as possible as their funding mechanism tho. But reduces pressure on them if shares crash a bit after that, still high risk borrowers.
"Hey Mr. Inference Provider, you can sell tokens for $0.03 that cost you $0.02, to PRC end users who are too poor to use Claude or don't like that it refuses their use case, which is spam, scams and cheating on homework.
Or, you can trade $0.03 of tokens that cost you $0.02 for $1.00 in ANTHROPIC SHARES, which makes the thing that everyone uses for like, math discoveries and curing cancer."
Average Hacker News commenter (not you): "Nooooooo it's not profitable Anthropic is going to crater nobody will take their convertible notes"
By reading the comments I wonder if perhaps OAI & ANT are not going to be “model” companies and they are going to be the ones innovating in many fronts and cashing in for the benefits of those advancements…
What I’m trying to say here is, what if, they are staying closed strategically so they keep their most advanced models close to their chest until they make an incredible discovery. Say they cure cancer. In this case, they are taking that IP collaborating with big pharma and cashing in on the upside of such discovery.
So, what if on top of being just another enterprise and consumer product that accelerates the way we all work and live, it also becomes this factory of breakthroughs and that’s where open source models can’t compete with them.
What a movie. Act like religious whackjobs (A) who want to consume the world. In secret you have a bag of world-changing causes. The setback in the middle of the plot is the supercomputer answering something mundane to a serious question. Everyone feels defeated. But one underling is chatting with his pal subagent 3495. And he mentions the mundane answer. Then the subagent makes a critical connection; the answer is not mundane, it just needs a proper interpretation. Then they send the answer out (15 minutes later) cancer is cured. They use the patents to pay off the debts and then give them away to the public. The CEO moves to a shed on Más a Tierra with a talking parrot companion.
IMO once AI can flywheel discovery, the entire international ip/patent system would simply break down - world is not going to allow US companies to automate innovation pipeline and horde / extract at scale, unless US somehow maintains full leading edge AI monopoly. Closed model discovering something a few months before open model and getting years of exclusivity rights is just not going to happen / last. If anything expect mass invalidation of IP which will disproportionately fuck over US incumbent IP leadership position.
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Blackstone told investors Anthropic may not receive an investment-grade rating immediately after going public, a reversal from its previous guidance that would complicate the AI lab’s ability to finance its massive spending.
The private capital giant told investors in Anthropic’s latest $63bn chip financing deal that the start-up is expected to receive a “high” junk rating from major credit rating agencies after its initial public offering, according to people familiar with the matter.
Blackstone is acting as an anchor investor on the deal, known as “Project North Star”, and is working with banks that stumped up financing on selling the debt on to other investors.
Anthropic filed to go public on Monday, setting up what could be the largest listing of all time next month. The AI lab’s prospectus sketched out its “bold but sane” plans to spend more than $800bn on computing infrastructure between now and 2045.
An investment-grade credit rating is central to those ambitions, enabling Anthropic to borrow at lower rates to finance its AI infrastructure projects. The group has cash and equivalents of more than $112bn, and investors anticipate it could raise about $100bn more in the IPO. Sign reading "Blackstone" outside the Blackstone headquarters in New York, with pedestrians and city lights reflected in the glass. Blackstone’s funds have invested in $9bn of the junior debt at a lucrative yield of more than 10% © Angus Mordant/Bloomberg
While Blackstone had told its investment partners in recent months that it was expecting an investment-grade rating for Anthropic before year-end, it has recently signalled that a rating in the double B range or above is more likely given the guidance it has received from major credit agencies, the people said.
Such a designation would limit the pool of capital that Anthropic could tap because many insurance and pension funds are restricted from taking large positions in junk-rated borrowers. As a result, the company might need to continue to rely on its suppliers with high credit ratings to support its debt-raising efforts.
US tech stocks slid to session lows on Friday following the FT’s report on Anthropic’s rating, with the Nasdaq 100 down 3.7 per cent in afternoon trading. Markets were sharply lower prior to the report after earnings from Amazon and Intel worsened fears about the sustainability of the AI boom.
“It’s all about access to credit, it really matters . . . if [Anthropic] isn’t investment grade, the cost of credit goes higher, that’s not good for anyone,” said a US tech-focused portfolio manager.
“It’s a bloodbath out there,” they added, referring to the sell-off in stocks.
Wall Street banks earlier this week closed the North Star deal, which provides the financing for Anthropic to lease 1.5 gigawatts of Google’s semiconductors. More than $42bn of the senior loans is guaranteed by Broadcom, which co-develops the chips and has an investment-grade rating, while $18bn of the junior debt is backed by the AI start-up’s lease payments.
Institutional investors covet senior debt because it takes priority over junior loans in the case of a default. Broadcom’s high A-tier credit rating was an important factor in allowing Anthropic to secure the financing.
Blackstone’s funds invested in $9bn of the junior debt at a lucrative yield of more than 10 per cent, the FT previously reported. Bankers for Anthropic and rival OpenAI have also lobbied the largest rating agencies to grant the AI labs investment-grade ratings after their IPOs.
Project North Star’s $18bn junior debt, which exposes lenders more acutely to Anthropic’s credit risk, has been assigned a double B plus rating with positive outlook from Kroll Bond Rating Agency, a slight improvement from stable outlook in a similar deal known as Project “Big Sky” four months ago. It also received a double B rating from Morningstar D...
This line is certainly eyebrow-raising to the educated layman.
Apparently it means that anthropic is leasing a Google data center whose constituent servers draw 1.5 GW of power running representative workloads.
By any sane normal sense of business and financials these AI labs look terrible on paper.
Any loan would be speculative at best, and the rating would simply reflect that.
If they're actually that confident I hope they short the stock long term with basically all their money.
So yes, I believe it's going to leave a smoking hole in the ground, but I won't be betting money on it.
But guys, if your companies weren't run by psycopaths and weren't promoted by assholes who appear to be the exact same guys behind the NFT craze, (this is the future of creative expression! Don't like it? Your a luddite. Cope.) and weren't predicting horrible nightmare scenarios based on their tech maaaaaaybe people would like AI and be more interested in using it?
I personally see that generative AI is a very powerful and useful technology but I hate everyone involved in it and do not want to see them succeed because they're icky people.
Its like if the nazis had discovered how to harness atomic energy before anyone else. Fuck that.
I'm indifferent either way myself. It's just shocking the amount of ignorance.
-Upton Sinclair
Google is a bit oblivious (though is probably the smarter money based on diversification alone IMHO). OpenAI has folks wondering just how publicly Mr. Altman can blunder his wording before he gets ousted (today was along the lines of "you will own nothing" with his take that personal RAM ownership being an affront to efficiency).
All three are trying to convince enterprise buyers that central tokenmaxxing is the best thing since sliced bread; many of the circles I run in occasionally have huge (emphasis: huge in the 2010s ZIRP sense) buyers that are begging for more edge AI.
Structurally there in a terrible position on what’s unfolding now with the completely collapse of model valuations. With truly “open” models gaining more and more momentum models are basically worth nothing and “token” prices are collapsing to the cost of compute. That doesn’t leave anything on the table for the Anthropic and Open AI’s of the world.
Point is, the number of tokens is a silly metric to proxy these companies' growth.
At current prices, it makes sense to self host, but if the price goes down and the demand grows across different verticals, there is room for this business.
Anthropic could be super profitable right now if they stopped developing new models. But then they'd quickly fall behind because there's not much of a moat. Maybe the only ones who will survive this are huge companies like Google with separate incomes who can swallow the cost of staying on top.
Let's say that the house of cards crashes down and takes the market with it who will shutdown, survive or have no choice but to get acquired for a 90% discount.
Some will be just alive long enough for the early investors to pull out enough before the market crashes.
Now, I'm not saying that's going to happen -- but if you take analogies from the dot-com era and assume they're going to play out in the same way, you can't just cherry-pick the bad ones.
Companies are staying private longer, raising many orders of magnitude more private funding, and IPOing straight into "top 10 biggest companies in history" size.
If you IPO at $1.5T you are already equivalent to ~1.5% of World GDP.
Thus is just for scale, as comparing GDP vs a company market cap doesn't make total sense since GDP is 1 year economic activity and market caps represent discounted future cashflows of future economic activity...
Let's say Anthropic IPOs at $1.5T and grows even 1000x over 20 years, it would be worth $1.5P (petabillion?). If it had a 20x earnings multiple like google this would imply Net Income of $75T. Mag7 total Net Income for 2025 was $500B or $0.5B.
World GDP is $125T, and has grown less than 5%/year before/thru/after DotCom. So lets say in 20 years its $250B and Anthropic is capturing 30% of world GDP in earnings (not revenue, that would be even higher)!!
So the math doesn't math.
Anthropic had valuation of $550M at their first venture round, and assuming it IPOs at roughly $2T, it will take them 5 years to give this 3500x return to their initial investors.
They are so going to get disrupted. Chinese open weights models will have no such limitations, and there's no way we'll let Anthropic outlaw or ban them. (And even if they did, they can't police the whole world.)
There is no moat. Anthropic should be playing nice, not trying to create a god while holding engineers under their thumb. We will route around it.
If the people can't access god, then we are living under a dictatorship with aims to enslave us.
Wait, what?
No, they're not. Maybe you are?
> A significant portion of people don't want AI in a lot of these things
Not true. People love AI. Specifically Android and iPhone AI. I doubt they even know or care about Anthropic or OpenAI.
> the ones that are eager to adopt it can use AI to bootstrap AI tools they use through a token router
Absolutely microscopic share of the overall market for "AI" users. We are hobbyists.
Realistically they need to 3x their revenue to pay for their compute. While that's plausible, I'm not convinced that it can all come from developers. Many many developers are already using Claude. I think they need consumer, or some other market too.
Infact they’re going to end up in price competition unless they field an army of ‘FDE’ who go to every large firm and reorganise the operations around their models and displace labour.
Anthropic can’t raise their prices without loosing market share of Claude code
An extremely hypothetical experiment but what if this is some sort of MAD (Mutually Assured Destruction) and in our timeline, we have accepted it with AI.
Deepseek can do MAD on Anthropic and release open weights model (which means that they might not earn the most or basically burn millions/billions to then give us all essentially the same thing and we would all be on equal footing, oh they also released their inference engine right now.)
This might explain why the stock market got into an bubble and is fearing itself right now.
Mutually Assured Commoditization. (Credit where it's due I pasted my comment to Chatgpt and it gave me this term ironically and it seems to fit well to the comment that I am writing, I might write a blog about it someday.)
Where it falls apart is when you get companies that take open models, rent compute and sell tokens at a profit, without heavy investment into research or training. They spend way less, and if they can keep distilling the frontier models, they can produce reasonable products without the massive losses of subscription plans. In your example, DeepSeek et al aren't nearly so vulnerable. There's nothing mutually assured.
It is much more of a classic race to the bottom. Every new frontier model shifts the goal posts a bit, but eventually the house of cards will crumble - or at least, that's what the market seems to be thinking will happen.
They are simply less profitable than API pricing. They are on par with what sellers of open model tokens sell for.
I think 2027 will be when a lot of companies revisit their AI spend and ROI. Have there been measurable business benefits reported by the media outside of programming?
My suspicion (and many others as well) is that AI is used as a way to cover for large corporate restructuring in the face of money no longer being available for “free” due to interest rates.
what I really push back on is the idea that there are magically going to be all sorts of entrants into the space that meaningfully compete with Anthropic or OpenAI in the near or even medium term. for as much as the reddit set continues to put their collective heads in the sand while screaming "there's no moat"... there is a moat, and one so prominent as to be self-evident. not once has an open-source model come even close to genuinely reaching frontier performance for anything other than cost, and cost is by definition the easiest thing to improve on-- just distill bigger model into smaller model: boom, cheaper!
When it comes to AI there simply isn't a moat - Anthropic would be my best guess out of the current entrants due to them trying to construct one via value-adding code assistance tools that might create enough friction to prevent customers from jumping ship but the models themselves are a commodity that depreciates extremely quickly. If you want to retain the frontier premium you need to constantly be improving due to the ease of distillation.
Myspace's peak popularity (in terms of monthly unique pageviews) came in 2007. Yahoo was ahead of Google for several years, though I am struggling to find good data on the specifics there. Your understanding seems to be based in your own personal experience of those sites, which is fine, but I don't think it quite matches the big picture.
Your proposal that there won't be any new entrants is puzzling to me because, in the grand scheme of things, OpenAI and Anthropic ARE new entrants. The entire space is new. It feels like ChatGPT became public eons ago, but it hasn't even been 4 years. Imagine saying in 2008 that no photo-sharing site would ever surpass Flickr - it's been dominant for 4 years! Why would you go to something new when everyone's photos are already on there?
One absolutely enormous advantage new entrants have in the AI space is that they can start on third base. Anthropic had to spend billions and billions of dollars to get to Opus 4.6. A new entrant could distill its way into a model roughly on par with that far more cheaply, and spend its VC cash on things like marketing and price cutting rather than burning it on actually creating a good model. The existing players need to service mountains of debt and are locked into deals for compute based on outdated assumptions about efficiency. I'm not saying it would be EASY for a new entrant to waltz in, especially to the enterprise market. But it's not impossible especially on the consumer side: Meta was essentially a non-factor until Muse came out, and now most people think of Muse when they think of an AI agent (as opposed to Claude, which is just a chatbot in the public imagination, because that's what it was when it became popular).
they invented mcp, terminal coding agent, context files like claude/agents.md.
I have no real clue whos going to win the model race but they have repeatedly shown that their internal taste is on point, reminds me a lot of early google.
But that won't stop them from issuing bonds or more convertible notes as they have and the market may or may not bite.
It does add pressure to their IPO proceedings being as high as possible as their funding mechanism tho. But reduces pressure on them if shares crash a bit after that, still high risk borrowers.
Or, you can trade $0.03 of tokens that cost you $0.02 for $1.00 in ANTHROPIC SHARES, which makes the thing that everyone uses for like, math discoveries and curing cancer."
Average Hacker News commenter (not you): "Nooooooo it's not profitable Anthropic is going to crater nobody will take their convertible notes"
What I’m trying to say here is, what if, they are staying closed strategically so they keep their most advanced models close to their chest until they make an incredible discovery. Say they cure cancer. In this case, they are taking that IP collaborating with big pharma and cashing in on the upside of such discovery.
So, what if on top of being just another enterprise and consumer product that accelerates the way we all work and live, it also becomes this factory of breakthroughs and that’s where open source models can’t compete with them.
Just speculating…