What a $30B Hedge Fund Implosion Really Means for AI

**Nathaniel Whittemore** (0:00)
Today on the AI Daily Brief, insane revenue growth, but also a hedge fund blow up. What is going on with AI in markets? The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI.
All right, friends, quick announcements before we dive in. First of all, thank you to today's sponsors, KPMG, Blitzi, Retool, and Airtable. To get an ad-free version of the show, go to patreon.com/aidailybrief, or you can subscribe on Apple Podcasts. To learn more about sponsoring the show, send us a note at sponsors.ai.dailybrief.ai.
Two more quick notes before we dive in. First of all, today is one of those episodes where all of the stories and the headlines also fit the theme of the main, so it's gonna be a main only. And second, you're reminded to come check out the AI Summer Adventure. You can find it at summeradventure.ai. It's a choose-your-own-adventure-style program where you can do projects at basically any level of AI learning. Go check it out. I'm excited to see what you do this weekend. But with that, let's talk some numbers.
Today, we have two stories that feel on first glance like they're telling totally different stories about the markets surrounding AI. On the one hand, we have just absolutely bonkers estimates and real numbers for AI lab revenue, which are in many ways genuinely hard to wrap your head around. On the other side, we have the utter implosion of a wonderkin-led hedge fund that is surging renewed questions about the durability of AI markets.
So let's figure out what stories these two very different events are telling and where they point for AI markets next. We're going to start on the revenue side, where both OpenAI and Anthropic appear to be having a resurgence in revenue growth. CNBC reported that during a recent All Hands, OpenAI CFO Sarah Fryer told staff that ARR, annualized recurring revenue for July, had exceeded the entire second quarter, adding NQ2 was no slouch. Now, without the full context, it is not exactly clear what Fryer meant, and the articles didn't do a lot to clear that up. But the takeaway certainly was that OpenAI had an absolute bonanza of a month. Then on Thursday, Axios reported that Anthropic was also seeing revenue skyrocket. Indeed, back of the napkin math put Anthropic at a $71 billion run rate up from 47 billion in May when they last discussed revenue. This figure was based on a post from Tay Kim, who was referencing data from AI investment research platform Funda. Meanwhile, their data also showed that OpenAI was sitting just shy of 50 billion in ARR. Now, obviously, this data should be treated as a very rough estimate, but it seems directionally correct based on Friar's comments. It also lines up with estimates from SemiAnalysis, who at the beginning of the month wrote that Anthropic is currently operating above 60 billion in ARR and look set to end the quarter with a billion dollars in profit.
Some believe they will just keep going. In a recent blog post, Dwarkesh Patel wrote, Anthropic likely ends the year with 100 to 150 billion in revenue. Now, on the one hand, those numbers seem absolutely gobsmacking, but if Anthropic really jumped 10 billion in ARR in July alone, it doesn't seem impossible. Pointing out that Dwarkesh is in a position to have a lot of behind-the-scenes conversations, former Atlantic author Derek Thompson noted that if Anthropic can hit this mark, they will have eclipsed the revenue generating capacity of Tesla and SpaceX combined.
For those not paying close attention, the surge also felt like it came out of absolutely nowhere. Just a week ago, The Wall Street Journal wrote an article about how corporate America had suddenly decided to stop blowing money on AI. That is obviously their words, not mine. On the face of it, it seemed reasonable. So much of the media's story around enterprise AI for the past few months is CFOs trying to rein in token budgets and substituting expensive frontier AI for open source Chinese models. So how the heck did these two companies have one of their best months yet? Two points that I've made repeatedly that I will use this as a chance to reinforce, which are honestly actually just part and parcel of the same point. And that is, we are currently consuming a tiny, even vanishingly small percentage of the total possible demand for intelligence from AI.
Yes, we have a very, very limited handful of companies who have a portion of their users that are deep enough that they actually have to do things like impose token limits. But the vast majority of the user base remains on the upswing with miles and miles of air above them. What's happening in the enterprise is not that companies have decided to stop spending. It's that they are seeing the early warning shots that what they can't do ultimately, as AI gets to full mature scale, is simply deploy Fable 5 for every single problem they have. They are, in other words, looking to get out ahead of a problem which is primarily the domain of the future by creating more complex AI usage architectures that involve multiple different models and smart harness and provisioning arrangements. But in almost no cases, our company is all of a sudden using less AI.