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 $1t+ per year in spending, per year, on tokens. 200m knowledge workers in the world, 30m developers. We're talking about a world where you need 5% of every knowledge workers salary to go into tokens. 20% if you're a developer.
That's a _huge_ shift. Most people I know cite +20%-40% velocity with these tools, against the actual work their company cares about doing. +20% speed for +20% spend isn't going to motivate a trillion dollars a year in spending.
We're not there yet. This is still the upswing of the hype cycle, and unless we figure out how to make developers 2x, 5x, 10x as productive on stuff that matters, this isn't going to play out well.
realotoday at 5:34 PM
200$ per month per seat is nothing .
A single 3D CAD license pack for the guys in our R&D group costs multiple thousands of dollars per seat, per month.
It's about time software seats get some love too.
prependtoday at 5:29 PM
> $2,180.16 worth of tokens for $200
“Tokens” don’t have an intrisic cost or value. Saying that I used $2,180.16 worth of tokens is like relying on the salesperson to convince me I’m getting a billion dollars worth of pots and pans for $19.99.
I think it’s funny how we are throwing critical thinking out the window when it comes to evaluating biased sources of info.
firesteelraintoday at 6:06 PM
Anyone actually making money paying all of these monthly fees? Or just hobbyists? I have yet to see any real ROI posted anywhere.
antmantoday at 5:40 PM
The costs are exorbitant and most software is not produced by companies with such a huge moat. Anthropic made a profit through their recent bait amd switch pricing. There is zero useful insights online to indicate whether this might die due to commoditisation with good enough open models or fail the race to get more people subsidising unsustainable growth with other people’s money. Who knows? In any case they dont seem to be able to drop usage costs so the business model seems based on wishes
smokeltoday at 5:44 PM
Does this analysis factor in potential caching of tokens on the server side? It seems that if they organize things well (as a model provider), they can save quite a lot on that. Looking at my Cursor statistics makes it clear that the token calculations are not at all trivial.
sourcecodeplztoday at 5:24 PM
With deepseek and xiaomi mimo models slashing their prices 99%, I don't see a great future for openai / antrhopic with regards to their 1T valuations. Maybe 1T valuation will be the whole market, West + East.
binary0010today at 5:27 PM
So how do openai and anthropic plan to keep customers when GLM-5.1 is just as good and open source and a lot cheaper?
I don't see the business model working. My closest friend actually does automation software for large companies.
He does not use Claude or openai at all. He primarily uses gpt 120b on cerebras and glm-5.1 for heavy thinking work.
And some other small models for various tasks. All open source.
And these systems are extremely useful for the businesses and are able to run fully automated pipelines that are very stable and fast.
We discuss this a lot, and we both think any business doing heavy agentic work on Claude and openai just aren't aware of exactly how good and cheap open source has gotten on the last year.
So... once the legacy businesses and developers catch up, won't Claude and openai be unable to recoup their costs?
zuzululutoday at 5:27 PM
Great article I know this upsets a lot of people who are used to thinking Anthropic/OpenAI are just lighting cash on fire but they've cornered the market on enterprise who cannot walk away from these $200/month plans
However the valuations are still far far away from actual sanity
mesmertechtoday at 5:27 PM
If nothing else this blog did give me the idea that I should split my $200 claude max plan into two $100 CC max and $100 codex plan, esp because Claude is now offering 1.5x weekly limits so its the 5x usage is now more like 7.5x usage.
darth_avocadotoday at 5:41 PM
How is the lack of bad news declaring a victory for AI? I am yet to see any company concretely publish analysis about the ROI from AI. Most companies as far as I know are still treating AI investment as sunk cost with no expectation of returns at the moment. We could very well see a world where companies heavily scale back investment.
smallerfishtoday at 5:38 PM
I think the reasons for them going with API pricing will become abundantly clear when the S-1s become available. If they don't have a story covering how they can get revenue closer to expenses, then they're relying on the market to believe the pixie dust version of their profitability story, which I think people increasingly don't.
enraged_cameltoday at 6:05 PM
I wonder how Ed Zitron will shift goal posts this time, and how long it will take for that article, when published, to reach HN front page.
spprashanttoday at 5:18 PM
So it largely sounds like many more people will be able to write software - and will use AI to do it. Existing software engineers will continue to automate their tasks away like they always did, but perhaps at a faster rate.
The impact of AI in other fields seems to be muted.
airstriketoday at 5:50 PM
Who's to say those enterprises won't churn after XYZ comes out with a decent enough model that costs 10x less to use?
There's a whole bag of clever tricks you can play to juice short term results leading to an IPO that may not work longer term.
I'll believe they've found product-market fit when they have a product. Right now they're selling the infrastructure, in a highly subsidized and undifferentiated way (at least over a sufficient long period of time of, say, a couple of years).
CuriouslyCtoday at 6:02 PM
Companies are kool-aid drinking now due to hype, but given how much they're spending, if they don't see REAL, BIG wins from it soon, they're going to scale it back quickly and switch to Chinese models. Claude isn't worth the API cost for a lot of development work, and once companies have had time to collect and crunch data they'll see this.
osigurdsontoday at 5:47 PM
Realistically, OpenAI found product market fit with the OpenAI API playground in 2021. People were using that as ChatGPT at the time.
x187463today at 5:24 PM
I wonder how a focus on per-token API profits will impact the incentives to improve token efficiency and drive down costs through optimized compute. I suppose as long as a few leading labs are competing, we'll see progress in this regard, but it's certainly less in their interest than it is with a flat subscription pricing model.
CachedaCodestoday at 5:20 PM
Ai has become indispensable but maybe not at all cost. My company just had a company-wide meeting to talk about how they're restricting who can use which models and instructing us the "be more responsible with company's tokens". And it's not an small company by any means.
Legend2440today at 5:34 PM
>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.
I notice this all over the place. Many people hate AI and want it to fail, and they're willing to invent misinformation if it supports that idea.
dude250711today at 5:35 PM
> Anthropic are strongly rumored to be about to have their first profitable quarter.
Is that quarter same as any other quarter in terms of infrastructure costs (e.g. are there any temporary discounts happening coincidentally)?