Anthropic raises $3.5B at $61.5B valuation
nytimes.com
nytimes.com
What's the scenario look like where multiple LLM providers like Anthropic and OpenAI both live up to their valuations? Claude being 1.1x better at code and OpenAI 1.1x better at some other stuff doesn't seem like enough differentiation to do it.
NewHype valuations reflect how confident current investors are that later investors are still coming and have nothing to do with specific profit models. Maybe the hype will pay off or maybe it won't, but during this phase all I need to believe is that I can get out before the tide turns.
At this point, the carrot that keeps investors coming is that many many people still believe at least one of these companies will become the next IBM/Microsoft/Apple/Google in one way or another and we don't know which one yet.
It's just buying tradable bets on a horse race that won't see its end for several more years. One horse could win, all the horses could drop dead, and none of it matters today: the game is in deftly trading those betting tickets as the odds shift.
I personally don't think this is possible unless these AI Companies translate from just bits to atoms but that's not out of the question[1].
[1]: https://venturebeat.com/ai/openai-has-begun-building-out-its...
The real target is replacing search with AI, as well as locking up all content creators into exclusive deals so that other LLMs don't get access to the new data.
Just like how streaming has locked video content under different vendors, LLMs will split information across multiple vendors and we will need to get subscriptions to different companies in order to search things in the future. And it's going to cost a lot of money for us peons to get access to data in the future.
Late 1990s internet infrastructure buildout means that most of the captured value was at the hardware level (HP Computers, Dell, Intel, Cisco etc.).
2020s AI infrastructure buildout appears to be the same. NVIDA is capturing a lot of value, and experiencing explosive growth.
Late 1990s/early 2000s was a time of tremendous development for web software , but no one really had a business model. These LLMs are like the web browsers of that era -- they are an interface to access other peoples IP, but no one really knows what the financial model looks like.
It wasn't until the mid 2000s/early 2010s that the business models came into sharp focus for web services.
Like web browsers, the LLMs might be a vital tool for enabling the capture of value for businesses, but it might not be the actual thing that they end up monetizing.
To draw an analogy it's sort of like the stock market. You'll never achieve sustained above-market returns by trading based on publicly available data because everyone else has access to all the same data. In order to get an edge over other traders you have to do proprietary research (or be faster or cheat).
It seems like most (all?) foundational models were trained on stolen content. I’m not sure what content exclusivity looks like for LLMs. It’s not like Joe Rogan signing on with Spotify where they have exclusive distribution rights for a particular piece of content.
This is the worrying part. The real content creators are people like you or me (not reddit or stackoverflow) and we aren't getting a piece of the exclusive deals. So if this is the end game, then it means either exploiting real people who are writing things or that people stop using it and the internet uses a lot of its utility as a place for communication and shared knowledge; probably a bit of both
At this point, I would bet that for the average user the middle tier models for all the major players are more for their uses and any differences are indistinguishable. Even when major advancements are made by one party, it seems like everyone else can catch up pretty quick. I'd expect that to continue to happen, especially if companies start embracing open source as the future (like they're claiming they will).
If that happens, the winner in this space won't be who has the best model, but who can build the better company. It's going to be able the deals they make, they products they build on top of their models, and who can bring their costs down the most.
Our hacker community is not a good proxy for the overall userbase.
And I can run it locally!
I don't have this issue with qwen2.5-coder, deepseek, etc.
Some of OpenRouter's [0][1] providers seem bunk; their version is corrupted. Occasionally just get mangled outputs. Fireworks [2] is my best experience so far: their serverless API, haven't messed with custom deployments. Fast, performant, better than other models in its size category and less expensive.
[0] https://openrouter.ai/deepseek/deepseek-chat:free
IDK, I won't pretend to know the difference between $61.5B and $123B, we can safely assume both will have a similar value, OpenAI as first mover, and Anthropic like a Pepsi.
>What's the scenario where both Anthropic and OpenAI both live
Pretty much all of them, their risk of failure is pretty much independent. You said software usually has near monopolies, which I agree, there's usually 3 or 4 or 10 big entities. To my estimation because of the need for competition and market segmentation. So the survival of one only conditions the other as a dependent event in the order of 1/10.
Our economic system is set up to continuously increase the supply of money at a rate that results in the average price of things consumers buy increasing 2% a year.
Technology is a deflationary force and if our system wasn't constantly adding more money the price of almost all consumption goods would continuously fall.
These investors are banking on the idea that these companies will automate so much high value labour that there is a massive wave of deflationary pressure on the economy, resulting in massive increases to the supply of money to balance it out.
So by crude example; 10 years from now anthropic could end up with 1% market share and be worth $10 trillion.
And still there is plenty of space for those closely related, such as Cloudflare.
It's the Azure/AWS business model.
Protectionism by the US federal government.
Assuming I'm right, I'm not really looking forward to a point in 5 years when shareholders all suddenly decide they agree.
Assuming everyone agrees Anthropic is worth very little, they still get to keep the 3.5 Billion investment.
I imagine the consequence would be:
1) Anthropic investors lose a lot of money.
2) Anthropic probably struggles to raise more money
3) Anthropic raises their prices to become profitable.
The economy is interlinked, and a bubble bursting hurts many people.
Part of it is realizing the pains of inefficient allocation of capital. A bubble "bursting" is often an indicator that the capital in within that bubble had been previously misallocated. So the broader pain when the bubble bursts, is partly society and the markets suddenly discovering that the $3.5B probably could've been put to better, more productive uses.
Sorry, what are you saying happens at that point?
https://news.ycombinator.com/item?id=43164257
EDIT: since I posted this 54 minutes ago I started this MVP of a valuation calculator: https://claude.site/artifacts/4e7c0461-d62f-4c47-b285-971af2...
Please note that EquityZen is notorious for being a premium payer in the market, to the tune of 20 to 500%.
Most people going, “these valuation are insane” because these AI companies are not profitable and doesn’t seem to be a clear path to profitability.
That's what OpenAI head said in an intreview
To recreate all Microsoft’s meaningful profit-generating offerings would cost a very small fraction of $3T. In SaaS space startups are competing with MS products for much cheaper. In operating systems, commercial Linux (RHEL, SteamOS, etc) is competing for much cheaper. In gaming, Microsoft has contributed much to game cost inflation, meaning others compete for cheaper. In hardware others compete for cheaper. In home office, even Google and Apple likely spend less to compete. Maybe in web services Azure leads in costs and has some moat, but I’m only saying this because I don’t know it well.
This is not to say MS is not an impressive company, but $3T is not its real value. From the stock market side, PE of 32-ish suggests it’s meaningfully over-valued too.
So I know you kind of meant that question in a half joking way, but it is a good question. You can’t explain $3T with real value, it has to be speculative or bubble-ish.
Comparing how much money it would take to build a competitive portfolio of products to compete with Microsoft is like comparing how long it would take to build a Twitter or Facebook clone. Sure, it wouldn't take that long or that much money, but product is the easy part.
We can also ask whether Microsoft's market is free, from a macroeconomic perspective. I would say it is not. There is still a very significant consumer lock-in from Microsoft's dominant position. Some would even argue that this lock-in is monopolistic as Microsoft created many markets it inhabits (operating systems, home publishing, small business software, PC gaming, and similar). I don't mean to criticize here - monopolistic is a very loaded word politically. Objectively, It's natural that businesses are monopolistic for some time when they create markets. But not forever.
My point is that Microsoft's monopolistic position is not sustainable unless it provides services that are either significantly differentiated or cheaper than the competition. As such, it should not command its market cap. Microsoft understands this, as its strategy is to establish itself as a monopoly in emerging markets (like AI) by using "embrace and extend," a business tactic they are known for. But I don't believe monopolies in moat-less markets are easy to sustain. This, once again, brings the market cap into question.
Perhaps I am missing something; this is just my opinion, anyway. But I am trying to look at it objectively from a corporate finance perspective. It's easy to get lost in marketing speak. Microsoft does a lot of "upward management" aimed at its public shareholders, so it's important to look at the fundamental facts. Microsoft is an impressive company, and it has many things to brag about, but some matter more in its actual business economics, and some matter less.
I don't believe infrastructure matters as much as the monopolistic lock-in they have (for now) and the competitive edge they don't. Perhaps they will find a more sustainable business model as it's clear from how their products and offerings have been developing that they are urgently trying to.
This is the important point. A SaaS company with a competitive offering isn't participating in the economy. Participation requires distribution. Distribution consists of on the ground sales, channel partners, post sales support, marketing, education, a developer ecosystem, trust, security and compliance buy in, workforce training, and a host of other components that a new company doesn't have. The vast majority of startups with great products perish because they don't have this and there's few shortcuts.
Monopolistic practices are really neither here nor there. You can see distribution win over product quality in every industry. Out of product, brand, and distribution, product contributes the least to market cap.
No or government in the world currently functions without Microsoft...
Costs a bit of money, but dealing with Google Docs, Synology, Dropbox, email and web hosting providers took so much effort. Setting up Sharepoint etc. isn't trivial either but at least it's a standard setup that you'll always find someone who can manage it.
Word, Excel and Powerpoint are the standard tools everyone uses to get their job done.
Until lots of free AI models close the gap again. It is simply not good enough for such valuations like this for Anthropic.
Any other valuation higher than 70B for Anthropic is really overvalued and such higher valuations are always defended by those who invested in it already.
I realize that on benchmarks it appears R1 is very close to Sonnet 3.7, but in practice I use Sonnet 3.7 much more.
I'm out of the loop. To whom are you referring?
It really seems impossible to justify these evaluations from any kind of economic perspective.
Sonnet with thinking is at 64.9% (the top), but it's pricey - about double the cost without thinking.
A model that is 50% less likely to try to prove false theorems tho is much more useful than than one that happily tries.
I'm not sure that HN folks appreciate this, but making commercial software is way easier than math and science (all the evidence you need, except the experience of understand QFT or advanced mathematics) is found in HN itself.
No matter who you are, the rest of the world combined will always be bigger. That is why Linux won the cloud, and why Windows server simply could not compete.
I tried Aider a couple of months ago and it gave me crappy code. Maybe it was the model I used back then, but I didn't like it. I had much better experience with Claude Code.
Can you elaborate on "check everything in pycharm?"
Bother to try it for yourself, and make your own decision. I know it make actually be a bit of work...but you'll probably find everyone has their own style from the web API, to some IDE. No need to be so hostile.
This seems to be a case where it's meant genuinely, but it's not surprising that not everyone picked up on that.
And does it let me limit the files it's sending?
A coworker was trying both out on a project, and was finding Claude Code to be 4x more expensive (both using the Sonnet-3.7 mode) - because he couldn't limit the context Code would send. As the project grows, that multiplication factor could be a lot larger.