There is just no way all these data center investments in the trillions pay off. That has to be paid out of cashflow, like, real profit. The price to do useful things keeps falling, the payroll economy will crash long before there's actual trillions of dollars of cashflow for tokens.
They just need 5% of the worlds population to get $50-100 value per month out of them.
Even in my non-SWE job, paying $100/mo for my current $20/mo plan would still be a no-brainer.
I don't think there is much concern about open models either. Compute is constrained for the foreseeable future, and money is what will determine who gets it. Nevermind that the US will likely block Chinese model imports or China will block exports at some point. The cold war has already begun here.
Dario Amodei has apparently recently suggested that Anthropic might become only only private AI company in the entire world, which obviously it won't.
There is competition everywhere, and it is intensifying and catching up, not fading away. Open weight models are becoming more common, both within the US as well as elsewhere. Treasury secretary Scott Bessent just praised Meta's open weight models.
There is demand for AI at all different price points, and as all models at all price points become more capable, it seems that increasingly developers are seeing the most expensive ones as specialized tools, not daily drivers.
Compute/memory may be constrained for a few years until production capacity catches up, but this does not mean that demand for cheaper and open weight models will go away, else it would already be happening. Anthropic would like to sell an expensive Ferrari to everyone on the planet, but 99.99% of those people have no need for anything more than a Yugo.
betting on a compute bottleneck sounds like a recipe to get thrashed when the bottleneck relieves itself.
At the investment scales being discussed, CUDA/architecture and other advantages do not matter - you could spend 1 billion on building a new chip architecture. The ram/fab inputs have been a commodity market for years. Heck, even the model bottleneck doesn't seem real when it's only 1-4 billion or less to get a state of the art model.
At some point the compute bottleneck will be relieved, you can see NVidia hedging their strategy with both open models and on-device chips targeted for local inference. The 200 dollar a month plan will absolutely be taken over by local hardware in the future.
Enterprises will pay tens of millions a month, millions of individuals will pay $100 a month and there will be a long tail as they offer cheaper pricing and perhaps ad-supported pricing.
The average American family won’t be willing to pay more than a Netflix subscription.
I think in five years, it will only be power users that use a model in its raw form - everyone else will mostly consume using wrapper apps.
Token cost is falling rapidly for a given quality. We don't think about this too much as newer models have made legacy apps obsolete - but its an interesting question what the cheapest text to sql or similar model would be. I still go by 10x cost decrease per 6 months for any given model quality.
Why that many people per month? What timeframe were you considering for them to pay off their expenditure? For that matter what are you estimating their total expenditure to be?
I would be curious to see if they ever publish detailed statistics on this. I'm sure as others have said the average family will not be paying much if anything for AI. Just within the HN bubble I have been paying a bit for it just for my hobbies and it's been fun, enlightening, incredibly useful for rewriting other peoples code and asking it all the dumb questions that I would get entirely roasted for here. Curious to know how many others are using it that way for hobbies, silly questions, rewriting other peoples code, finding and fixing vulnerabilities, debugging performance bottlenecks, etc...
I highly doubt 415 million people will find enough reason to purchase $100 worth of Anthropic, especially when the price of intelligence keeps going down and smaller models become more and more capable to meet the average person's needs like drafting emails, customer support, basic RAG.
The cost of intelligence doesn't matter, it will just make margins wider.
Just look at software over the last 20 years. People pay based on the value they receive, not the cost the produce or serve it. That fact is literally is the backbone of tech, and why it has been an absolute money machine.
I think the worst case scenario for the labs is current (or next gen) SoTA models reaching a point where cheap consumer hardware can fully run them. But the labs practically have a monopsony on compute, and getting the kind of long context current models thrive on out of 16GB GDDR6 is gonna be a trick.
Tech has been a money machine because it has a marginal cost if approximately 0, so tech companies could literally give there products away and live off of the pennies they get from serving adds. Software is one of the hardest product classes to get people to pay for because the cost is anchored at 0.
It is the entire scam and many of those funding the data center build-out know this. Otherwise why are they hiding the trillions of debt under the rug?
There's a reason why a company like Stripe can stay private far longer than Anthropic or OpenAI can.
These AI companies have taken in all the capital from private investors and are still losing hundreds of billions and have no choice but to hype up the IPO and dump some of the stock at a purposefully inflated valuation to retail investors.
They are worth (on paper) so much that there are not enough retail money to buy them anymore. All these companies can do is put Uncle Sam on the hook to print money for them. There is no other way.
That means that Anthropic with its lousy revenues should have an IPO for $25 billion and not $2 trillion. All growth scenarios are a complete fantasy. They aren't even profitable and will never be.
As someone who does not understand how IPO works. So they do not need to show whole “big picture” of their revenue vs costs before going public? Wouldn’t build it trust to show they are healthy company worth investing besides speculation? (It must be naive question from)
Yes they do. They have to file an S-1 with the SEC, which will be made public about a month before the IPO.
The S-1 has to include, among other things, three years of audited financial statements, plus interim statements (unaudited). It will cover both revenue and expenses, the latter breaking out things like cost of revenue, R&D, sales and marketing etc.
Based on the (unofficial but reported) IPO target date of late Sep to early Oct, the S-1 will have to be made public in a few weeks from now.
They do, but the accounting rules change based on context. They will file an S1 today outlining how they are rolling in profits then, come tax time, suddenly they are hemorrhaging money. Flesh-and-blood investors have lost all trust in financial filings. See SpaceX.
It's obviously not in their interest. Disclosing would only work as marketing for their IPO and it's the most anticipated IPO in history and needs no marketing. There is like zero positive side to disclosing audited financial statements and massive liability.
"There is like zero positive side to disclosing audited financial statements and massive liability."
Why are you posting about stuff you have zero clue about?
Oh theres no positive side... yes there is. There is a huge amount of failure risk weighing on both OAI and Anthropic - investors don't care about how great you claim your technology is gonna be. They want to know if a viable buisiness model is taking form and whether you will be around long enough given the investment time horizon of the investor.
Right now China is making that failure risk even larger. This directly affects the IPO.
They reported a $47B run rate in May. This article claims $4.7B revenue in Q1 and $11.5 B in Q2. It all aligns with a very high growth rate. Here's one set of numbers that fits (though I suspect the growth may have been a bit spikier than this):
Jan $1.0 B
Feb $1.5 B
Mar $2.2 B
Apr $3.0 B
May $3.9 B
Jun $4.6 B
We already know they are not profitable in the truest sense w.r.t valuation.
FCFF = EBIT(1-t) - Reinvestment.
This is how the operating assets are valued via intrinsic valuation.
Could they generate immense earnings and cash flows net of reinvestment? Sure. DO I believe so? Nope. They've got way too out infront ahead of their skies about where this technology belongs and operates best.
Even in my non-SWE job, paying $100/mo for my current $20/mo plan would still be a no-brainer.
I don't think there is much concern about open models either. Compute is constrained for the foreseeable future, and money is what will determine who gets it. Nevermind that the US will likely block Chinese model imports or China will block exports at some point. The cold war has already begun here.
There is competition everywhere, and it is intensifying and catching up, not fading away. Open weight models are becoming more common, both within the US as well as elsewhere. Treasury secretary Scott Bessent just praised Meta's open weight models.
There is demand for AI at all different price points, and as all models at all price points become more capable, it seems that increasingly developers are seeing the most expensive ones as specialized tools, not daily drivers.
Compute/memory may be constrained for a few years until production capacity catches up, but this does not mean that demand for cheaper and open weight models will go away, else it would already be happening. Anthropic would like to sell an expensive Ferrari to everyone on the planet, but 99.99% of those people have no need for anything more than a Yugo.
At the investment scales being discussed, CUDA/architecture and other advantages do not matter - you could spend 1 billion on building a new chip architecture. The ram/fab inputs have been a commodity market for years. Heck, even the model bottleneck doesn't seem real when it's only 1-4 billion or less to get a state of the art model.
At some point the compute bottleneck will be relieved, you can see NVidia hedging their strategy with both open models and on-device chips targeted for local inference. The 200 dollar a month plan will absolutely be taken over by local hardware in the future.
The average American family won’t be willing to pay more than a Netflix subscription.
I think in five years, it will only be power users that use a model in its raw form - everyone else will mostly consume using wrapper apps.
We still have 2billion+ people offline. Looking at global population is the wrong reference frame for selling a $100/mo service.
Just look at software over the last 20 years. People pay based on the value they receive, not the cost the produce or serve it. That fact is literally is the backbone of tech, and why it has been an absolute money machine.
I think the worst case scenario for the labs is current (or next gen) SoTA models reaching a point where cheap consumer hardware can fully run them. But the labs practically have a monopsony on compute, and getting the kind of long context current models thrive on out of 16GB GDDR6 is gonna be a trick.
Another bozo who read a intro microeconomics textbook, learned a fancy word, and doesn't know how to apply it! LOL.
Wow you people on here are really funny.
Most people shouldn't open their mouths / write anything re. valuation TBH.
Why on earth do data centres need to be built from cashflow???
There's a reason why a company like Stripe can stay private far longer than Anthropic or OpenAI can.
These AI companies have taken in all the capital from private investors and are still losing hundreds of billions and have no choice but to hype up the IPO and dump some of the stock at a purposefully inflated valuation to retail investors.
The market cap however is only $50 billion:
https://www.macrotrends.net/stocks/charts/MBGYY/mercedes-ben...
That means that Anthropic with its lousy revenues should have an IPO for $25 billion and not $2 trillion. All growth scenarios are a complete fantasy. They aren't even profitable and will never be.
https://www.sec.gov/resources-small-businesses/exempt-offeri...
The S-1 has to include, among other things, three years of audited financial statements, plus interim statements (unaudited). It will cover both revenue and expenses, the latter breaking out things like cost of revenue, R&D, sales and marketing etc.
Based on the (unofficial but reported) IPO target date of late Sep to early Oct, the S-1 will have to be made public in a few weeks from now.
This is the biggest capital buildout on history. Saying money will be wasted is not insightful, it's obvious.
The financials were always bad. Everyone with half a brain avoided the IPO. Did you?
Why are you posting about stuff you have zero clue about?
Oh theres no positive side... yes there is. There is a huge amount of failure risk weighing on both OAI and Anthropic - investors don't care about how great you claim your technology is gonna be. They want to know if a viable buisiness model is taking form and whether you will be around long enough given the investment time horizon of the investor.
Right now China is making that failure risk even larger. This directly affects the IPO.
FCFF = EBIT(1-t) - Reinvestment.
This is how the operating assets are valued via intrinsic valuation.
Could they generate immense earnings and cash flows net of reinvestment? Sure. DO I believe so? Nope. They've got way too out infront ahead of their skies about where this technology belongs and operates best.
Both OAI and Anthropic tried to time their pricing to look good heading into an IPO window.
They got screwed as China has kept up. Wonder how they're gonna overcome this problem - protectionism? Maybe.
Very impressive growth for sure (they doubled in around a month?), but we don’t know the ratio of paying seats
You're projecting your preference for these products onto a hugely fragmented group of people.