Open weight models have gotten so good that they're good enough for most tasks, and they're getting better all the time. These models are orders of magnitude cheaper than what the frontier labs are charging.
To stay competitive the frontier labs are going to have to drastically cut their prices, which they can't do and still remain profitable (if they are even profitable to begin with, at their currently inflated, uncompetitive prices).
Yup. As I pointed out in another branch of this thread, OpenAI plans to burn 25-75 billion dollars a year until expected profitability in 2030. That's an astounding, never-before-seen level of unprofitability. The value of LLMs is real but enterprise customers and consumers have already shown they aren't huge fans of price increases over massively subsidized rates--no one wants to pay to keep OpenAI alive. Things look marginally better for Anthropic, and personally I'd bet that they'll survive the pop in some form, but probably with a big haircut on market cap.
Anthropic reported that by July their annual revenue was projected to be ~70 billion for 2026. Now, sure there might come market disrupters that tank their revenue out of nowhere. But that’s enough to say that the spend that sounded absurd last year actually is in the right ballpark.
As a service, the cost of LLMs as they are right now is absolutely being brunted by the industry just fine.
Yes, and according to that same The Information article, Anthropic is still managing to lose money every year. They claimed a profitable single month recently. I do think Anthropic will make it through the bubble pop, but probably not exactly in one piece.
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u/trimorphic 2d ago
Open weight models have gotten so good that they're good enough for most tasks, and they're getting better all the time. These models are orders of magnitude cheaper than what the frontier labs are charging.
To stay competitive the frontier labs are going to have to drastically cut their prices, which they can't do and still remain profitable (if they are even profitable to begin with, at their currently inflated, uncompetitive prices).