AI's Circular Psychosis
4 hours ago
- #AI economy
- #circular dependency
- #compute demand
- Anthropic and OpenAI dominate the AI economy, accounting for at least 70% of compute capacity and revenue backlogs at major cloud providers like Amazon, Google, and Microsoft.
- Both companies are highly unprofitable, relying on continuous venture capital infusions from hyperscalers and investors to pay their massive cloud bills, creating an unstable circular economy.
- xAI's decision to sell its entire 300MW Colossus-1 data center to Anthropic highlights a severe lack of demand for AI compute outside of Anthropic and OpenAI.
- Hyperscalers have bankrolled infrastructure and offered discounted rates to Anthropic and OpenAI, inflating an illusion of demand and driving excessive capex spending.
- Over 90% of AI software and compute revenues flow through Anthropic or OpenAI, with most AI startups acting as feeders for their APIs and operating at significant losses.
- The AI industry's growth is largely artificial, sustained by hyperscalers propping up two unprofitable giants, raising questions about the viability of 15.2GW of new data center capacity under construction.