The companies that own the customer relationship will ultimately beat those that simply own the best AI

The economics of frontier AI are starting to crack, and nowhere is that more clear than at Anthropic. As the company heads towards what could become the biggest IPO ever, it faces an ominous signal: Many of its U.S. customers are choosing cheaper artificial intelligence models over its most advanced option. That matters because it is testing a core commercial assumption underpinning frontier AI: that the most advanced models will continue to command a price premium. It’s an assumption that investors have already backed with hundreds of billions of dollars. Those sums are being deployed into an extraordinarily capital-intensive race to develop top models. But that makes economic sense only if those models can continue to earn superior margins over “good enough” alternatives. For now, the numbers still look solid. Both Anthropic and OpenAI have reported sharply accelerating revenues in recent months, and the former has even recorded its first adjusted operating profit. Yet Anthropic faces growing difficulty in persuading customers to pay for its leading model, Fable 5. Companies have rushed to deploy AI. But as the bills mount, they are becoming more cost conscious. OpenAI and Anthr…