Fair assessment. The challenge for OpenAI and Anthropic is that they need sizeable margins to pay for the massive costs incurred. Market forces are driving things in the opposite direction and fast.

When your competition has a tiny cost base compared to yours and lacks the bonkers future capital commits you made then that’s a terrible position to be in… hence their conundrum.

Even "massive costs" is an understatement: these companies have astronomically massive costs!

Take Open AI for instance: it has "zero debt" ... and $665 billion to $1.4 trillion in "long-term commitments".

With other digital goods the distribution and operating costs have been essentially free. No business worried that much about the cost of running Microsoft Office on the PCs they already distributed to their employees. They were only concerned about the licensing costs. And Microsoft didn't worry about the cost of printing CDs or the costs of serving Office online. It wasn't zero, but again negligible compared to the cost of development and the licensing costs.

For LLMs the costs of training and inference are a very significant part of the overall costs.

Except OpenAI and Anthropic has brought in a lot of money, that with this trajectory will make it some of the worst investments in ”software” ever (if it’s true enterprise clients are actively moving away, I know we are but for other reasons).