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I think Anthropic and OpenAI have found product-market fit

simonwillison.net

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Re: I think Anthropic and OpenAI have found product-market fit

#521

Post by neltnerb »

Tuna-Fish wrote: post #248
materielle wrote: post #211

Earlier quoted context omitted.

I'm about to leave a shallow comment, but I am a bit skeptical of the supposed drop in inference costs. If AI labs saw a lot of potential there, they'd surely be bragging about it non-stop? So the fact that publicly available information is conflicted is probably a sign that at the very least, the numbers aren't amazing. Yes I know there's no evidence and this is lazy reasoning. But there's probably a bit of truth to…

Why on earth would AI labs be bragging about how little the product they sell actually costs them to make? You don't want to do anything that reduces it's perceived value to the user, that might make them less willing to pay for it. Also, inference costs are bound to go way down with more optimized architectures. GPUs are fundamentally not great at inference. No platform where the weights are streamed from a large po…

Because companies that want to go public need to look profitable or potentially profitable. And before they go public they have to release real, actual, legally demonstrable numbers for their costs and revenue anyway.

Re: I think Anthropic and OpenAI have found product-market fit

#522

Post by simplyluke »

overgard wrote: post #511
doug_durham wrote: post #356

Earlier quoted context omitted.

Open source models that you can run locally are much more than 3 to 6 months behind. 6 months was the November inflection for Claude. No open source model is as good as Claude Opus 4.6.

I keep hearing about this "inflection", but it feels extremely exaggerated to me. And yes, I was using it at the time. It got incrementally better, it wasn't that amazing.

I think the bigger shift was harnesses and the two ended up somewhat commingled in people's minds.

Claude code was a lot of people's introduction to using coding agents that could do a lot more than copy-pasting from a chatbot or autocomplete.

Re: I think Anthropic and OpenAI have found product-market fit

#523

Post by noman-land »

overgard wrote: post #511
doug_durham wrote: post #356

Earlier quoted context omitted.

Open source models that you can run locally are much more than 3 to 6 months behind. 6 months was the November inflection for Claude. No open source model is as good as Claude Opus 4.6.

I keep hearing about this "inflection", but it feels extremely exaggerated to me. And yes, I was using it at the time. It got incrementally better, it wasn't that amazing.

The tool usage + skills got markedly better and so did the thinking cohesion. Add 1m context windows and it was a very noticeable shift.

Opus 4.6 quality for local inference would be revolutionary.

Re: I think Anthropic and OpenAI have found product-market fit

#524

Post by mesmertech »

Andrex wrote: post #206
mesmertech wrote: post #15

Earlier quoted context omitted.

For coding you always want to go with the best model in the category, not something that would be the best model if we went 1 year back which GLM 5.1 is, and I'm saying that as a big fan of GLM cause I run a translation site where GLM is good enough for the price. Most of the money right now is in coding. Openai and Anthropic just have to be 6 months ahead of SOTA open source models and they'll capture most of the en…

> For coding you always want to go with the best model in the category Will this always be true? There will never be an event horizon/point of diminishing returns where something not-bleeding-edge is "good enough" for 51%+ of users?

As long as closed source is 6 months ahead in terms of current difference. Although this is hard to figure out using simple percent based coding benchmarks, you def. notice it when you're actually trying to do a long task. Even simple things like UI "taste" is enough for me to use opus instead of 5.5 though even though 5.5 is strictly better for anything that doesn't have a UI, ie backend, scripts, making agent workflows etc

Re: I think Anthropic and OpenAI have found product-market fit

#525

Post by akdor1154 »

simonw wrote: post #169
hansmayer wrote: post #133

Earlier quoted context omitted.

This should be the top comment. Also, I think its not that many people, including our Simon here, are not good at math. Its more like, some of them seem to be incentivised to not be cough, cough, "good at math". How else will the hype sell?

I thought my post was pretty free of hype. I said that this new revenue "Maybe even enough to start covering their costs!"

See what you get for saying things with subtlety instead of hype these days... sigh.

Re: I think Anthropic and OpenAI have found product-market fit

#526

Post by root-parent »

trjordan wrote: post #11

They've got, ballpark, $5t to $10t to make back in the next 5 years, or the hardware buildouts will start getting written down. This means we're going to need $1t+ per year in spending, per year, on tokens. 200m knowledge workers in the world, 30m developers. We're talking about a world where you need 5% of every knowledge workers salary to go into tokens. 20% if you're a developer. That's a _huge_ shift. Most people…

Author seems strangely unwilling to distinguish usage from profitable product market fit. And from his own numbers:

Anthropic Max: $100/month

OpenAI Pro: $100/month

Total paid: $200/month

API equivalent usage: $2,180.16 in 30 days

So paid only 9.17% of API-priced value a 90.83% discount, or about $10.90 of API priced usage for every $1 paid...

That proves heavy usage but not sustainable unit economics.

Anthropic reported numbers point the same way:

Q2 revenue: $10.9B

Adjusted operating profit: $559M

Margin: 5.1%

SpaceX compute: $1.25B/month = $3.75B/quarter

So one compute supplier alone equals 34.4% of quarterly revenue and 6.7x quarterly adjusted operating profit.

Its difficult for the blogger to understand something when its incentives depend on not understanding it...

Re: I think Anthropic and OpenAI have found product-market fit

#527

Post by simplyluke »

oblio wrote: post #505
swalsh wrote: post #469

Earlier quoted context omitted.

Open source models, especially qwen are pretty dang good. But its not opus 4.6, the evals dont tell the full story. I question the assumption open source models are 3-6 months out.

To make an extreme comparison, desktop Linux was originally supposed to happen in 1999.

Maybe I misspoke by saying open source.

The larger point I'm making is I think models are rapidly becoming commoditized. There is probably a small market long term that's willing to pay 10x for 10% marginal gains, but the majority of the buyers in the market will be economic and we're likely to have a lot of folks willing to spend 1/10 the cost for 90% of the performance, and plenty of companies that haven't raised hundreds of billions-trillions who can provide that.

A lot of the frontier labs valuations has been based on an assumption that 1-2 companies would get break-away intelligence that basically made them economic chokepoints indefinitely into the future. The reality that's becoming increasingly clear is that model quality is a pretty linear function of (cash burned - ability to copy other's homework) and the economics are starting to look a lot more like airlines than online advertising.

Re: I think Anthropic and OpenAI have found product-market fit

#528

Post by peteforde »

hansmayer wrote: post #128

> Anthropic are strongly rumored to be about to have their first profitable quarter No, its more like their own leak to WSJ and according to Ed Zitron -> seems to be heavily engineered via non-GAAP practices such as counting potential , but not realised revenue as actual revenue - the stuff for which I would be arrested if I did it at my company. Also it appears according to Ed's analysis - strangely they seem to be…

Ed is a smart guy, but you or anyone basing your opinion on what one eloquent journalist says is ultimately a risky bet, no matter how much his reporting hits your particular dopamine receptors.

Please don't forget that Ed's entire brand identity is now 1:1 with exposing "AI" as a giant, unmitigated failure.

That's a very specific flow chart to hook your caboose to when none of this is even remotely close to endgame.

Re: I think Anthropic and OpenAI have found product-market fit

#529

Post by simonw »

root-parent wrote: post #526
trjordan wrote: post #11

They've got, ballpark, $5t to $10t to make back in the next 5 years, or the hardware buildouts will start getting written down. This means we're going to need $1t+ per year in spending, per year, on tokens. 200m knowledge workers in the world, 30m developers. We're talking about a world where you need 5% of every knowledge workers salary to go into tokens. 20% if you're a developer. That's a _huge_ shift. Most people…

Author seems strangely unwilling to distinguish usage from profitable product market fit. And from his own numbers: Anthropic Max: $100/month OpenAI Pro: $100/month Total paid: $200/month API equivalent usage: $2,180.16 in 30 days So paid only 9.17% of API-priced value a 90.83% discount, or about $10.90 of API priced usage for every $1 paid... That proves heavy usage but not sustainable unit economics. Anthropic repo…

My point with the $2,180.16 thing is that the price for consumers like myself is heavily discounted... but the price for enterprise companies is not discounted.

My usage is therefore a useful indicator of quite how much those enterprise companies may be spending on tokens, given the new pricing scheme.

If enterprise companies were still getting the same discounts that I get myself I would not have written this article.

(I had to dig into your margin figure - looks like you calculated 5.1% as 559000000 / 10900000000 * 100 but that $559M "adjusted operating profit" figure includes training costs, where usually when we talk about margin on inference we're not including those since those costs are fixed, margin calculations make more sense against the variable costs of serving a token.)

Re: I think Anthropic and OpenAI have found product-market fit

#530

Post by noddingham »

I feel like there's a bit of AI psychosis in this particular post.

>"These are tools which burn vastly more tokens, but are also quickly becoming daily drivers for the work carried out by extremely well-compensated professionals."

>"Somehow this fragment turned into headlines like Uber’s COO says it’s getting harder to justify the money spent on AI tokenmaxxing, because the market for stories about AI failures remains enormous."

Yes, it's just the yearning for AI failures. It couldn't possibly be runaway costs, record revenues, and massive layoffs. It couldn't possibly be that these tools are lighting dollars on fire by people already paid significantly well and not producing any increase in "value" for it (I recognize that output is 100x but outcomes are flat by all measures).

[1] https://cmr.berkeley.edu/2025/10/seven-myths-about-ai-and-pr... [2] https://futuretech.mit.edu/publication/crashing-waves-vs-ris...

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