Anthropic, xAI and the Inference Moat

In Sebastian Mallaby’s The Infinity Machine, Demis Hassabis is quoted as saying that he sees one lab getting to AGI. In its founding charter, OpenAI made grand claims that they would stop competing and assist any rival lab that came close to AGI first. The staggering amount of funding that is going into AI initiatives at the moment is predicated on AI being a winner-takes-all (or winner-takes-most) race. Sitting out the race is not an option, hence the trillions of dollars spent on chips, memory, data centers, and training data. We have Jensen Huang as a benevolent king handing out H100s to supplicants.

But what would the end state look like?

A couple of weeks ago, Anthropic and xAI announced a partnership allowing Anthropic to lease the entire Colossus 1 datacenter. This followed announcements of partnerships between Anthropic and Google, Akamai, and others for compute. Anthropic cannot keep up with demand for their models. These partnerships are a direct response to the compute crunch facing the lab.

In total, Anthropic has made commitments to acquire almost $80bn in compute commitments over the next couple of years. This is a direct refutation of the recent narrative that “OpenAI is winning” because of their access to compute. The market has spoken – Anthropic has the (projected) revenue to buy whatever compute they need. On the other hand, OpenAI’s much touted Stargate initiative is faltering: they couldn’t reach terms with Oracle and are pivoting away from the owned-stack approach.

The narrative around AI can be a little … strange sometimes. Almost religious. Utopian dreams and dystopian nightmares. But, I think the most likely outcome is going to be more prosaic. One or more labs will dominate the market because, like Anthropic, they have a superior product. Instead of vertical integration to invoke the Machine God, we will have these companies make deals with a variety of different infrastructure provider to meet inference demand. Maybe more labs will follow xAI’s lead and become infrastructure providers or niche players.

The winner won’t have the biggest “AI factory” but instead they will become the customer that every provider would want to service.