Okay, I will play along. Anthropic stops training new models tomorrow. They start turning a profit. Yay! Except wait, they still have 450 billion in commits that cannot be cancelled and another 300 billion that apparently they can cancel under certain scenarios. But maybe that all magically goes away somehow; I don't know, Coreweave is feeling generous because they are doing so well, probably not, but this is the fantasy so I digress. So they have this really great product that people want and they can just sit back and make money. Except no one else is going to stop training. And not only that some random Chinese company you have never heard of is distilling their model and is going to come out with a clone version that is 99 percent as good in one year. And on top of that, every 6 months one of the big 5 competitors comes out with a new model that is better. Anthropic can't keep charging the same price so they lower their price and lower their price until they are back to break even. Now they have an inferior product and are not competitive anymore. There is no moat.

If under the scenario you outline where they don't need to upgrade then AI is commoditized and margins are razor thin. And that is fine. Great even! But it doesn't justify Anthropic's trillion+ dollar valuation.

“The competition to train better models is about capturing more market share now.“

Where is the moat? There is no cost of switching. Anyone or any company can bounce between AI with minimal cost of switching. So unless they find a way to compelling or way to keep users beyond, “our model is the best” user acquisition isn’t going to matter a whole lot.

The important point is that all competitors are in the same position, they’re all on equal footing and face the same costs for training frontier models. The major players do have advantages from their infrastructure buildout and the deals they’ve negotiated with enterprise businesses which partly shuts out small competitors. It’s also yet to be determined whether smaller competitors can actually surpass the big labs in capability or whether the degree to which they depend on synthetic data generated using frontier models puts a hard limit on how far they can improve. The market is unique, it requires huge infrastructure but can also grow through investment in research and also easy to duplicate the latest advancements. It’s also not constrained by location so it can’t be easily understood as something like railroad infrastructure or power utilities. The biggest factor is growing demand, there’s more than they can all supply together and it seems likely to keep growing as more tasks can be automated.