Comment by iLoveOncall
20 hours ago
> If the party continues, they'll go from $50b in revenue to $500b and be fine.
You really have to be insane to think that an AI company will ever reach $500B in revenue. That's almost the same as (2025) Amazon, Walmart, etc., companies with a MUCH wider market.
It is MORE than Apple, it's 5 times more than NVidia even. There is absolutely no software seller that is even remotely close to $500B in revenue.
Absolutely ridiculous.
I’ve spent more money on Claude this year than I’ve given to a lot of other tech companies, combined. Well, I bought a new phone too - but amortised over the phone’s lifetime it’s still much cheaper than I’ve spent on my claude subscription and what I’ve gotten my company to pay in api usage credits.
There are two questions. Will the value keep scaling? And how much of that value chain will anthropic hold on to? Right now software development is being eaten alive by LLMs. Will that happen to other industries too? And in the long run, what do the models we run look like? Are people going to end up self hosing opensource models themselves, or are we going to collectively hitch our wagons to frontier models provided by anthropic and their competitors?
If ai keeps getting better - which I think it will - and if anthropic can corner a large part of the market in an enduring way - which seems less likely to me - then yes. I can easily imagine them becoming a huge company.
Your usage and spending is an outlier in the current market. Anthropic's numbers are only plausible if you become typical of AI users.
Yeah. It would require LLMs to sweep through other professions like they have in computing. I don't see strong evidence of that happening yet.
This is like somebody with a construction job who buys a new $100,000 truck - just because you paid that much to do your work doesn't mean somebody couldn't have accomplished the same with 1/5th the expense.
You've spent that money at subsidized prices but would you spend 5x if subsidies stop?
"Subsidies" don't stop because it's not "a subsidy". It's a subscription service.
Like Netflix, Comcast, T-Mobile, etc, etc. There are millions of subscription services in the world. They all "subsidize" higher-usage users with plans for lower-usage users using a fixed price plan and rate limit. The profit comes from lots of users who don't hit their cap. The higher priced plans are actually more profitable.
This is called a tiered usage-based subscription business model.
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I think you are underestimating the market for AI. The better it gets the more the market expands.
The total amount spent on salaries in he US alone is over 12T dollars.
Assuming AI becomes ever more useful and is widely adopted 500B in revenue is not that crazy.
Here's the thing though: like labor today, employers will constantly be pushing for the lowest possible price. Especially in a world where open models are 90% as capable, the cost of AI labor will quickly drop. Thats not a good thing for Anthropic or any other frontier AI lab. There's a reason most companies don't just hire the top 5% of intelligent individuals. Its really just not needed for most business.
Also another aspect: think of the most highly paid workers right now in the US and the companies they work for. Assume that normal people no longer have jobs due to AI. How are these companies going to continue making revenue to pay Anthropic? Anthropic might get a quick buck but a long term growth business is not macro-economically possible for frontier AI businesses.
As I understand it, AI is only really getting traction in IT and software development. It's been mostly irrelevant elsewhere overall, all things considered. That could change, but basically there's only one product that is selling. Dunno whether there is $500b/year of IT and programming to replace.
People are using it to do contract negotiation without a lawyer, argue with their doctors over health matters, complain to teachers about their methods, etc. On the flip side, lawyers are using it in supplement to paralegals, doctors transcribing patient notes with it, and teachers are using it to generate worksheets. It's being used fairly widely already
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Let's posit that that's possible, for Anthropic to get to 500B in revenue, they'd either need 100% of the market or the market has to be even bigger.
OpenAI, Google, the many Chinese labs all have products and several of them likely have better financial positions. At the moment Anthropic have one of the best models but it needs to stay sufficiently above competition for them to capture a large share of the market.
At the same time this year we've seen a move for model diversification as cheaper models become "good enough". If this IPO was 6 months ago I think it might have gone better for them.
I think the market has the potential to be 1 or 2 trillion in the US, 10% to 20% of labor costs. I say this because I believe most companies would not blink at spending that money to supply their workforce with AI tools assuming the AI actually did the work.
The winner take all network effects are probably not there in this case, but still if Anthropic is a large player and has 20-30% of the market they could have a revenue in the hundreds of billions.
Double the size of the market to include most of the rest of the world and the 500B is suddenly under 20% market share.
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The "good enough" problem is a real biter. The personal PC market overtook the mainframe market long before PCs were even close to beating the top supercomputers. Cheap and good enough is the threat.
What does good enough look like for various use cases, when do we hit it, and can these companies guard that territory?
If you ate up that 12T dollars on AI, the economy would collapse and whoosh would go the 12T dollars.
My hypothesis is not that the AI is going to eat up that 12T dollars. But there will be additional investment to provide AI tools to the workers to the tune of 10% to 20% of their salaries.
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Employers are reducing AI spending, not increasing it.
You're also assuming that basically the entirety of the market would go to Anthropic, rather than other providers, which makes no sense.
You are vastly over-estimating the market for AI. The extreme majority of people would never pay a dime for it.
this.
n=1 but at $company we are already told to stop tokenmaxing and find cost savings for ai to the point of degrading user facing features (no loading llm generated content by default etc)
from here it looks like prices have to come down or demand will stall...
That doesn’t seem ridiculous at all. Replacing clerical and knowledge workers is a vastly larger market than iPhones.
The thing to be remember about those companies you listed, none of them are software companies like Anthropic is.
* Amazon is a logistics company * Walmart is a logistics and retail company * Apple is a hardware company (that uses software to set their hardware apart) * NVidia is a hardware company
The closest you get is Microsoft, at 281B in revenue. Some might argue Google/Alphabet, which is in the same area, but they sell Ads, not software.
Anthropic's expectations is that they will be able to fast-track their revenue generation to almost twice what Microsoft does today. In less than a few years.
> The thing to be remember about those companies you listed, none of them are software companies like Anthropic is.
Yes exactly, that's why I listed them. It's much easier for them to capture a higher revenue compared to software companies, and OP (and Amodei) want to make us believe an AI company could ever reach that revenue.
I agree with you from our perspective it is ridiculous. I also agree that getting the consumer market to willingly pay for AI to the point where it sustains such an amount of revenue is not going to happen. (The knock on effects of folks using AI, and turning others off to AI because they used AI instead of writing emails themselves, for example).
But.
They may peak at 500B before this bubble bursts, simply because other major industry players are betting on AI as a means to get folks to believe in their own stock.
It’s belief all the way down, until you get to the point where “the market” starts asking where the return on investment is, and why they haven’t seen it yet. By that time, the investors have gotten their return and cashed out, and it’s the pension funds and the retail traders that are holding the bag.
And of course, at some point AI’s promise will be delivered in a form or fashion as yet unknown to us, but that is still years away, and until folks recognize that LLMs as they exist to day are not the path to that, they’ll continue to believe in this valuation.
Nvidia almost hit 100B in revenue last quarter.
What feels ridiculous today might be the normal of tomorrow. Welcome to the new world.
What you are saying is the same thing that has been said about anyone trying to do anything massive and at scale. Can't be done - thats ridiculous - you are out of your mind.