I don't see how Anthropic can become profitable enough to justify its investments unless they can either stop training models ("Pace the Frontier!!1"), or magically eliminate open source competition so that their volume x margin on inference is high enough to dwarf the training costs.
For the IPO, I assume they're going to try to get everyone to focus on inference - which is profitable in isolation. But I don't know how they'll distract the market from the other half of the equation.
Unlike the dot-com era, this is a bubble that everyone saw coming.
Like dot-com, there are many long-term winners, but cash hungry frontier labs are not among them.
Prediction:
OpenAI, Anthropic, Oracle, and SpaceX[1] go down and assets be sold or companies acquired for a fraction of their valuation. The same goes for most neoclouds. Profitable "old" tech companies like MS, Google, Meta, and Amazon are fine and scoop up the valuable parts for pennies.
Nvidia will be in Cisco's position (Cisco was the world's most valuable company in the dot-com era). Both are good companies that are not going anywhere, but stock prices get decimated when markets collapse (Nvidia liabilities are not high enough to take company down, they are mostly tied to there not being a bubble and data centers are getting built)
[1] Everyone already knows that, according to SpaceX, > 80% of SpaceX's valuation is in AI, not in space stuff, right?
“So, what you're telling me is that the music is about to stop and we're going to be left holding the biggest bag of odorous excrement ever assembled in the history of capitalism.”
A brilliant line from the movie Margin Call (a fictional portrait of the actual events of the 2008 crisis) that appears likely to get reused in upcoming AI bubble burst movies.
New Constructs takes a similar position on all mega IPOs. Sometimes they're right, but sometimes they're wrong. For example, they insisted Uber's IPO valuation was too high due to unsustainable losses, hidden liabilities, etc. Initially they were proved right when the post-IPO stock price plummeted, but in the long term Uber has performed well, become very profitable, and now trades well above its IPO valuation.
I'm expecting a similar story to play out with Anthropic: The stock price will come down significantly after the IPO, resulting in lots of headlines about the AI bubble bursting. But in the long term it'll climb up again and investors who stick around will do very well.
“Now trades well above the IPO valuation” does not mean something would have been a good investment at the IPO price given opportunity cost and the time value of money. Additionally, the current price could equally not represent good value.
I suspect SpaceX is going to be the opposite of what will happen with Anthropic. With SpaceX I think the overwhelming majority of people didn't initially understand what Starship is, how far along it is, or what it even means in terms of its impact on the pathway of getting humans to be a multiplanetary species. So it was greatly undervalued and zoomed upward.
With Anthropic I think a lot of people haven't really realized the trend line of cost of "AI" (both in literal $ terms, and compute costs for local operation) or what open weight systems will do to the market in the "long run", where long run in this case means the next year or two. I don't think any LLM company is going to come out a winner in the longrun, because the price for LLM output is going to approach $0 with no chance for a moat whatsoever.
Anthropic's small models are almost certainly distilled from their larger ones. And their biggest training expense are going to be experimental models that aren't even intended for release, just to test out some idea.
The model is engine, the harness is the car Anthropic are selling.
They are a service company, selling home-grown, mass-produced, conveniently packaged intelligence at a well established price for consumer. Their API pricing might just be for value proposition and tax deduction purposes.
Every tech company, tech department, startup that I know is using claude code to deliver. The boutique deepseeks, qwens, glms and kimis are nice, but ain't production ready in 98% of cases. All the pi's, opencodes, etc are nice, but much less enterprise friendly. And google just outright sucks in comparison. There's a use case for each, but not at the scale Anthropic is doing.
Only real competition - OpenAI - is close, but they're burning money to stay there, which imo is unsustainable long term.
Is Anthropic worth $2T? Can't say. But boy they have a good opportunity to test this, and they may not have a similar chance in the future.
I don't see how Anthropic can become profitable enough to justify its investments unless they can either stop training models ("Pace the Frontier!!1"), or magically eliminate open source competition so that their volume x margin on inference is high enough to dwarf the training costs.
For the IPO, I assume they're going to try to get everyone to focus on inference - which is profitable in isolation. But I don't know how they'll distract the market from the other half of the equation.
They don’t care if they get to sell more equity.
This. The product is the stock, the tech is the fomo theater to sell the product.
Unlike the dot-com era, this is a bubble that everyone saw coming.
Like dot-com, there are many long-term winners, but cash hungry frontier labs are not among them.
Prediction:
OpenAI, Anthropic, Oracle, and SpaceX[1] go down and assets be sold or companies acquired for a fraction of their valuation. The same goes for most neoclouds. Profitable "old" tech companies like MS, Google, Meta, and Amazon are fine and scoop up the valuable parts for pennies.
Nvidia will be in Cisco's position (Cisco was the world's most valuable company in the dot-com era). Both are good companies that are not going anywhere, but stock prices get decimated when markets collapse (Nvidia liabilities are not high enough to take company down, they are mostly tied to there not being a bubble and data centers are getting built)
[1] Everyone already knows that, according to SpaceX, > 80% of SpaceX's valuation is in AI, not in space stuff, right?
Interesting take. How high is that probability within the next five years, do you think?
> In an interview with CNBC in 2021, Trainer acknowledged that “crazy stuff happens” and New Constructs doesn’t always get it right.
> “I can’t let that bother me,” he said at the time. “I have to stay true to what I think is right.”
Monkey remains true to darts, dartboard.
I posted other (different) research into the IPO yesterday: https://news.ycombinator.com/item?id=50033644
“So, what you're telling me is that the music is about to stop and we're going to be left holding the biggest bag of odorous excrement ever assembled in the history of capitalism.”
A brilliant line from the movie Margin Call (a fictional portrait of the actual events of the 2008 crisis) that appears likely to get reused in upcoming AI bubble burst movies.
New Constructs takes a similar position on all mega IPOs. Sometimes they're right, but sometimes they're wrong. For example, they insisted Uber's IPO valuation was too high due to unsustainable losses, hidden liabilities, etc. Initially they were proved right when the post-IPO stock price plummeted, but in the long term Uber has performed well, become very profitable, and now trades well above its IPO valuation.
I'm expecting a similar story to play out with Anthropic: The stock price will come down significantly after the IPO, resulting in lots of headlines about the AI bubble bursting. But in the long term it'll climb up again and investors who stick around will do very well.
“Now trades well above the IPO valuation” does not mean something would have been a good investment at the IPO price given opportunity cost and the time value of money. Additionally, the current price could equally not represent good value.
Yeah. Look at SpaceX. Dropped to $108 from an Ipo price of $135, but it's currently at $162 which is... fine?
I suspect SpaceX is going to be the opposite of what will happen with Anthropic. With SpaceX I think the overwhelming majority of people didn't initially understand what Starship is, how far along it is, or what it even means in terms of its impact on the pathway of getting humans to be a multiplanetary species. So it was greatly undervalued and zoomed upward.
With Anthropic I think a lot of people haven't really realized the trend line of cost of "AI" (both in literal $ terms, and compute costs for local operation) or what open weight systems will do to the market in the "long run", where long run in this case means the next year or two. I don't think any LLM company is going to come out a winner in the longrun, because the price for LLM output is going to approach $0 with no chance for a moat whatsoever.
While I think SpaceX is still horribly over-valued they at least have a diverse line of businesses that are very hard to copy.
Anthropic is a one trick pony and the world is discovering lots of other cheap ponies that do the same trick.
Maybe the portion of Anthropic that produces Opus/Sonnet can be spun out for us devs at a reasonable valuation?
Keep all the Mythos/Projects/etc. hype/feature-creep crap in some other entity and value that at $5 tn or something if you wish.
Anthropic's small models are almost certainly distilled from their larger ones. And their biggest training expense are going to be experimental models that aren't even intended for release, just to test out some idea.
This reminds me of all the people asking for AWS to be spun out of Amazon.
The model is engine, the harness is the car Anthropic are selling.
They are a service company, selling home-grown, mass-produced, conveniently packaged intelligence at a well established price for consumer. Their API pricing might just be for value proposition and tax deduction purposes.
Every tech company, tech department, startup that I know is using claude code to deliver. The boutique deepseeks, qwens, glms and kimis are nice, but ain't production ready in 98% of cases. All the pi's, opencodes, etc are nice, but much less enterprise friendly. And google just outright sucks in comparison. There's a use case for each, but not at the scale Anthropic is doing.
Only real competition - OpenAI - is close, but they're burning money to stay there, which imo is unsustainable long term.
Is Anthropic worth $2T? Can't say. But boy they have a good opportunity to test this, and they may not have a similar chance in the future.
I think they have a fair chance at this.