Because their core product is not a long-term sustainable business strategy. Local hardware and models will continue to improve to the point of not needing the hosted solutions. And if you do need a hosted solution, remember that the big cloud providers already offer these solutions, so signing up for OpenAI/Anthropic _and_ AWS/GCP/Azure is not a sound business decision compared to just signing up with 1 of them that offers your cloud infra + GenAI infra. (Which is why the long-term benefits for cloud companies will probably be for the likes of AWS and not the likes of OpenAI).

They'll continue to burn money for marginal model improvements in the next few years all the while having no moat _and_ having Open-Weight / Local models eat their lunch.

The only way for them to stay relevant as a company is to expand beyond simply providing the models.

I'm old enough to remember the arrival of RDBMS, once IBM primed the space with DB2.

There was a pitched battle over features like row-level locking as competitors like Sybase, Ingress and Oracle scrapped it out. New features arrived on a monthly cadence, with immense engineering effort behind them. The winners (Oracle mostly) won a great moat which led to them to where they are today.

The fact that so many AI companies can produce amazing coding tools so quickly shows there is no moat, supporting your theory.

I would phrase it slightly differently.

The companies who control the compute resources will ~always control the greatest "amount" of intelligence. They can lease that intelligence out, or they can use it themselves. Currently the "total amount of intelligence" or perhaps "total amount of ability-to-do-stuff" is split between humans and machines at a ratio that means it still makes sense to lease the machine intelligence to the human intelligence - plus there are things that humans are still better at. In maybe 2 more years that will stop being true, due to the availability of more physical compute resources, and far greater model intelligence per unit compute. At that point, the point at which the substantial majority of ability-to-do-stuff is controlled by machine intelligence, then the entities who control all the compute will control all the ability-to-do-stuff, i.e. "the economy."

So I agree that the core product is not long-term sustainable as a product but this is because the whole world will look so different in the near future that the framing of intelligence as a "product" breaks down.

Open-Weight models, of course, are fine and useful, but if you have one million times less compute than your competitor (the lab), then you're not really playing the same game. You can only tackle the problems that they have decided they're not interested in.

Their moat is the tens of GW of power and associated compute.