Breaking: bad news for three of the biggest IPOs in history

Scoop from Madison Mills at Axios, reinforcing what I said here the other day:

This is bad news for the AI industry, and fits well with what I warned about on Tuesday, adding in particular to the concerns from there that I circled below:

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One big reason why Anthropic is having a blowout quarter (aside from the massive one time subsidy that they got from SpaceX) is that companies have been “tokenmaxxing” for the last few months, encouraging employees to use GenAI as much possible, without much regard to payoff. That means lots of short-term revenue to Anthropic and OpenAI, but it never seemed like a sustainable idea to me:

A month later, it already looks like the moment has passed; tokenmaxxing may have jacked up Anthropic’s second quarter, but it looks like it won’t last. Nobody is going to be comfortable accidentally burning half a billions of tokens in month. Budgets will tighten, especially when people realize just how costly agents (which burn orders of magnitudes more tokens) are.

Axios quotes Ali Ansari, CEO of a model training firm known as Micro1, as saying “The enterprise is undergoing a "healthy swing" away from AI overuse — or "tokenmaxxing," the push to burn as many AI tokens as possible” – which means less revenue for Anthropic and others. Or lower prices and even more challenges in being profitable.

Consistent with the Axios quote, and the Uber concern’s I expressed a couple days ago, I am seeing more and more reports online like this:

The second sentence— “Tokens got burned for millions of dollars without any real significant ROI to show for it” – might well turn out to be the epitaph for an era.

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Just imagine what might happen to the economy and people’s retirement funds if these projections from FT are correct:

And it could get worse, if tokenmaxxing is indeed a fad whose time has already begun to pass.

Brace for bailouts.