Yes… and as the article says folks are still leaving some work to the big labs. But the big money is to be made at scale and those use cases don’t require OpenAI or Anthropic.

The crazy setup here is that even with that fraction of the pie these companies might be worth say $100 billion optimistically, which would be amazing in normal times. Problem is it’s a train wreck for their investors and the associated debt bubble if they can’t sustain a valuation of 1-2 trillion and the present setup does not put them on a course to that trajectory.

Of course. But that market won’t produce a $800 billion company, unless AI becomes ludicrously widespread — energy is used every day by virtually every person on the planet, and of course has plenty of mass consumption & “luxury” customers too.

Fair assessment. The challenge for OpenAI and Anthropic is that they need sizeable margins to pay for the massive costs incurred. Market forces are driving things in the opposite direction and fast.

When your competition has a tiny cost base compared to yours and lacks the bonkers future capital commits you made then that’s a terrible position to be in… hence their conundrum.

With other digital goods the distribution and operating costs have been essentially free. No business worried that much about the cost of running Microsoft Office on the PCs they already distributed to their employees. They were only concerned about the licensing costs. And Microsoft didn't worry about the cost of printing CDs or the costs of serving Office online. It wasn't zero, but again negligible compared to the cost of development and the licensing costs.

For LLMs the costs of training and inference are a very significant part of the overall costs.

Except OpenAI and Anthropic has brought in a lot of money, that with this trajectory will make it some of the worst investments in ”software” ever (if it’s true enterprise clients are actively moving away, I know we are but for other reasons).

But they're all converging on capability. Do I care if it's a 72% or 74% on SWEBench? Practically, probably not. And if I'm not paying per token locally, then if it takes a tiny bit longer to get to the result, I don't care.

Yes, but changing models, even across providers, takes about two seconds and one line of code.

It’s literally the least stickiest thing in the history of tech. Which is a big problem for these companies.

I don't think most motorists would care if OpenAI's gas stations just released 106-Octane "Intersteller" gas, unless their cars specifically require it.

Even commodity markets recognize different grades of product. The oil market separately prices different grades of oil, different refined products. All that really matters is that when you go to the market to buy, you can say, "I need X amount of this grade of this product" and that is what you will get. If AI models can be sold that way, you basically have a commodity market.