API Reddit Mentions | ChartExchange

I appreciate you actually getting back to answering my original question instead simply obfuscating and deflecting.
First, let me say that there is nothing about this conversation that I am not understanding. There are no points that you have tried to make that were not obvious before you made them. Just like, as you're about to see in the rest of my response, it was obvious you to me that you don't understand value chains or business in general.
Again I repeat. I am not, nor have I ever been defensive in this conversation. Why would one be defensive when one is utterly flabbergasted that someone who clearly has no idea what they are talking about is uttering nonsense?
Since you seem to be very concerned about clear and calm discussion, I assume you will not take the above in a defensive manner, and that you, yourself, will read the rest of this response with an open mind (as you ask me to do) and indeed entertain the idea that you, in fact, do not have the experience or expertise to actually make the claims you are trying to make.
With that out of the way, let's get down to it: One note... you mention both OpenAI and Anthropic in your argument. While they both are foundation model providers, operationally and strategically they are entirely different companies in many ways, especially in revenue mix. For the rest of this I will be focusing on Anthropic. I also note that you conveniently left out Google Gemini from your "they are all massively unprofitable" argument, but that is a discussion for another time.
First we have to start out by getting some terminology correct. It appears throughout your response that you are focused on "consumers". You state that the value chain starts somewhere up-stream with the raw materials, and flows down to the end consumer, Anthropic is the provider of the product / service to the consumer.
This right off the bat is utterly wrong. See, in the business world, the term "consumer" has a very strict definition: a person who buys and uses a product or service for their personal, household, or family needs and NOT for resale or business production. The term for the businesses that product the products or services for consumers are called B2C businesses (Business-to-Consumer).
In their B2C business yes, Anthropic does indeed provide their products / services to consumers (you and me, at home, working on a menu tracker for our families for example).
The problem here is that 75% - 85% of Anthropic's revenue comes from Enterprise contracts and pay-per-token API usage. This is known as B2B (Business-to-Business). Only roughly \~20% of their revenue comes from Claude subscriptions from consumers. When a business operates in a B2B capacity, that means, by definition, that they are somewhere upstream in the value chain. They are not the end producers of the product or service, they are an input into the production of the product or service, and that cost is folded into the operations of their customers as they manufacture / provide the products or services to the next step in the chain.
Out of that 75% - 85% Enterprise / API revenue, the vast majority is brought in from integrations with hyperscalers. Anthropic earlier this year announced that 100,000 of their customers are already using their models on AWS Bedrock, while similar integrations exist at places like Azure Foundry and Google Cloud Vertex.
See, their business isn't selling to consumers. Their business is securing distribution through third party providers that embed Anthropic models into their platforms. Amazon gets to bundle Claude into the products / services they offer to their enterprise customers, those enterprise customers utilize AWS Bedrock / Google Cloud Vertex / Azure Foundry to create products and services that contribute directly or indirectly to the operations of those customers, and so on and so on.
To give a clear example: Say I run a physical retail business with a storefront, cash register, and I also have a website. To run my business I chose Toast for my payments solution, I pay Website Company, LLC to manage my website and marketing / SEO. Website Company hosts my website and digital solutions on AWS, and they utilize AWS Bedrock and Claude to perform the routine work I need as my products get updated and to analyze my traffic flow. They also leverage Claude internally in their own SEO Optimization tool to help me understand how my SEO efficiency and requirements are changing over time. They utilize Claude to provide a service to me that I pay for. On the financial side of the business I utilize Toast IQ to analyze my company financials, inventory, and operations to better understand my business and improve operations. Toast provides this service to me through their Toast IQ product that lives on Microsoft Azure and is powered by Claude, through Azure. I pay Toast for all of this.
Now, as for my business, all of these costs roll up into my cost of operations. For every unit of product I sell to you, the consumer, some small portion of all of my costs (including all the AI usage from upstream in the value chain) gets added onto the price for that unit of product you as the consumer purchase. We have now reached the initial end of the value stream.
The product reaches your house, you open it, and the product is broken or defective. You want a refund. You go on my website and interact with the chatbot on my website that is powered by Toast, which hosts the chatbot on Microsoft Azure, and powered by Claude. You tell it the problem and that you want a refund, the chatbot initiates the refund process, and you send the product back.
While all of the costs of using Claude eventually does get passed on to you as the end consumer, you never directly pay for Claude. You, in fact, never had any idea that AI was used at any step of the way. You actually can't be certain the chatbot was AI and not just a well-programmed heuristic script.
My vendors (Toast and Website Company) paid for the Azure / AWS space, the AI development costs, etc. and passed those costs onto me, with a decent markup for their profit margin. I utilized those AI tools, likely paying for those tokens as I use them, to help run my business and support you, my customer. All of my costs using these tools get passed on to you.
Okay, so we have established what the value chain actually looks like...and we have proven that Anthropic, for at least 80% of their revenue (and in fact some estimates have put that number at around 95%), is NOT the end of the value chain but rather exists all along the value chain in a B2B capacity.
Okay, so we currently don't have live, verifiable numbers for Anthropic and their distance away from reaching profitability. Also, none of the big 3 hyperscalers (Amazon, Microsoft, Google) split out inference revenue as an independent P&L (they all roll up into the Cloud segments as a whole), there is no way we can get extremely precise with the profitability here.
But just for fun, let's take a look at Google. While they don't break out "AI" as an independent line item, Q2 report showed a mind blowing 82% YOY increase in revenue to $24.8 Billion, an operating margin of 35.6%, and contracted customer backlog increased by 390% to $514 Billion. They reported nearly 90% of Fortune 100 companies are using Gemini Enterprise.
Even if Anthropic isn't profitable, Google Cloud (which includes the revenue and costs for AI running on Google Cloud) is insanely profitable and growing insanely quickly.
However, all of that is irrelevant. For some reason you and others who actually, no offense, don't understand what is going on here from a business perspective keep hyper-focusing on Anthropic and OpenAI and their profitability. That is irrelevant. Do I believe Anthropic will become profitable? Yes. But they don't have to in order for the AI buildout to produce value. Why? Commoditization.
Research shows that the core AI labs are constantly working to innovate, and last year's models quickly lose ground to newer models, even open-source ones.
The real question isn't "which model wins". The real question is "is there value being created here at all, regardless of the model?".
There are some very interesting reports that have been released over the past few months showing clearly showcases the trends and realities that support this case.
You and others are focusing on the wrong thing. It doesn't matter if Anthropic or OpenAI become profitable. The only thing that matters is if value is being created and turned into surplus profitability. Google doesn't care if your AI solution is running Gemini, Claude, GPT, Kimi, or any other model. As long as your AI solution is running on their machines. In fact, it will likely turn out to be better for the hyperscalers if the majority of enterprises end up utilizing open models as that frees up more potential margin for Google instead of Anthropic taking their cut.
If you would like me to link you some articles to the research I mentioned I'm happy to.
But suffice it to say that focusing on Anthropic and OpenAI, and assuming that the majority of their business is through the consumer channel, and assuming that they are the end of the value chain..... is just an entirely false understanding of this world and how business works. Your world view on this matter is muddied by misconceptions or out right lack of knowledge / experience.
I don't expect any of this to get through to you. We are likely both intelligent people who think we are correct here. The difference is, no offense, you are wrong. I understand how cocky that sounds, but it is what it is. You can either accept that you don't have the knowledge / experience to stick to your guns here....or not. Either way I truly hope you have a great day. I will not be responding anymore in this thread. If you want to talk about this more offline I'm always happy to continue the discussion individually.

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