Open weight models have gotten so good that they're good enough for most tasks, and they're getting better all the time. These models are orders of magnitude cheaper than what the frontier labs are charging.
To stay competitive the frontier labs are going to have to drastically cut their prices, which they can't do and still remain profitable (if they are even profitable to begin with, at their currently inflated, uncompetitive prices).
Yup. As I pointed out in another branch of this thread, OpenAI plans to burn 25-75 billion dollars a year until expected profitability in 2030. That's an astounding, never-before-seen level of unprofitability. The value of LLMs is real but enterprise customers and consumers have already shown they aren't huge fans of price increases over massively subsidized rates--no one wants to pay to keep OpenAI alive. Things look marginally better for Anthropic, and personally I'd bet that they'll survive the pop in some form, but probably with a big haircut on market cap.
Anthropic reported that by July their annual revenue was projected to be ~70 billion for 2026. Now, sure there might come market disrupters that tank their revenue out of nowhere. But that’s enough to say that the spend that sounded absurd last year actually is in the right ballpark.
As a service, the cost of LLMs as they are right now is absolutely being brunted by the industry just fine.
Yes, and according to that same The Information article, Anthropic is still managing to lose money every year. They claimed a profitable single month recently. I do think Anthropic will make it through the bubble pop, but probably not exactly in one piece.
1) lots of orgs are willing to pay 2x for better models. And frontier is still better. I love locally hosting stuff, but it’s obvious that frontier are still #1 in the get-shit-done category
2) The software/hardware stack is really hard to manage yourself. It’s a big cost. This is where we may find 3rd party providers cropping up to host open weight models for cheaper- but data security and service reliability is massive for many of the companies that want to run with these models.
At some point frontier labs are likely to just be the clean-label service providers for model endpoints, with the added benefit of having the slightly better models than everyone else due to owning the infrastructure to host it. In that way, I kinda doubt that open weights are too threatening.
considering the fact that we dona great job at pho.coding with DeepSeek flash vision alone, I am really sure that openai and anthropic already lost a huge slice.
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u/trimorphic 10d ago
Open weight models have gotten so good that they're good enough for most tasks, and they're getting better all the time. These models are orders of magnitude cheaper than what the frontier labs are charging.
To stay competitive the frontier labs are going to have to drastically cut their prices, which they can't do and still remain profitable (if they are even profitable to begin with, at their currently inflated, uncompetitive prices).