In any case: author does not factor in Anthropic's potential gross margins on the tokens via the API. He assumes if $10,000 is consumed via the Claude Code API tokens, then Anthropic must be losing $10,000.
We don't know. What's their cost of inference?
Ed acknowledges that we don't know their inference costs in the article. But unless they made a Deepseek level of breakthrough in serving through API, they are either breaking even or losing money at each call.
There is a race to the bottom and survival of the deepest pockets right now in the field. And this "subsidy" funded by investors will not last.
Read the full story
Sign up now to read the full story and get access to all posts for paying subscribers only.
That’s what they said about Uber, too, but it’s still around.
Well, they are around because they increased the prices for customers, reduced the pay for gig-workers and added ads.
Comparing Uber to Anthropic is not correct, because their cost models are not the same. Uber has mainly labor cost which is low-skill and high-volume, followed by service costs which are high-skill but low-volume. Which leaves a lot of room for optimization.
Anthropic has very big bills to pay, and those bills will only go up as they scale. In depth analysis of frontier model companies is difficult, since they are private and secretive.
It is "unpopular" to say this, especially this bluntly, but low-skill labor can be made as cheap as you want it to be. If my numbers aren't wrong, average Uber/Lyft worker works for less than hourly local minimum wage (don't say tips, ~80% of Uber customers don't tip). But they accept it because of lack of opportunity, flexibility of gig jobs, and potential for working many jobs.
There's absolutely a floor at which point drivers will revolt, especially since they know how much the rider is paying.
There is also a fundamental floor how cheap compute can be: infrastructure costs, hardware depreciation, maintenance. Realistically, in next 5 years, we will not reach negligible compute costs. You can ask crypto-currency community about the limits of compute costs.