I will soon be joining Anthropic, and so this is my last opportunity to write down some thoughts on the AI lab business model before I can be accused of spilling any inside information. Although large language model (LLM) providers like OpenAI and Anthropic have spearheaded a new AI revolution, it is still not clear at this point that they are good businesses. The question on the minds of investors is whether these pioneering labs will reap profits, or whether instead other parts of the AI ecosystem (hardware vendors, cloud platforms, or end-user companies) will capture the lion’s share of value. This article surveys the competitive landscape and suggests some strategies that the labs could pursue to secure good economics for themselves. (While questions of AI safety its broader societal impact are important, I will leave these topics aside here and focus purely on the financial angle.) I. No technical leader The status quo is that labs are spending considerable resources training successively better models. For example, OpenAI has raised $60bn, Meta is spending as much as $60bn per year, and xAI has raised $12bn. Their reward for deploying these resources is to spend just a few months at the top of the benchmark leaderboards before being supplanted by a competitor. Despite the increasingly secretive development process of LLM technology, no lab has been able to take a decisive technical lead. Why does this happen? Perhaps the most important factor is that the labs are making many parallel discoveries. Technological breakthroughs often appear simultaneously as soon as prerequisites are in place - consider Newton and Leibnitz, or Tesla and Marconi. Even in the case where ideas aren’t rediscovered independently, many of these labs are based in California, where employment law that is hostile to non-compete agreements allows employees - and hence ideas - to flow freely throughout the community. Once public, ideas spread like wildfire. For instance, the Transformer arch...
First seen: 2025-04-16 18:19
Last seen: 2025-04-16 18:19