Closed-source AI models are doing pretty darn well

And: The U.S. IPO slump

Welcome to Cautious Optimism, a newsletter on tech, business, and power.

As CO heads to its editor, inflation data dropped. The good news is that CPI data came in under expectations. As with jobs data, there’s a lag between action and result, so it’s not yet clear what impact the trade war is having on prices. For now, markets can breathe a little bit easier. As can consumer wallets! — Alex

• 📈 Trending Up: Corruption … stepping back … cybersecurity funding … fintech (still!) … Bill Burr … Intel stock, after a lifeline appeared … empty schools … staff at the Department of Education … Spiritbox …

  • A ceasefire in Ukraine? The United States and Ukraine reached a deal with the invaded nation agreeing to a 30-day ceasefire. Ukraine will receive U.S. intelligence and weapons once again, and there’s a hand-wave included regarding “a comprehensive agreement for developing Ukraine’s critical mineral resources to expand Ukraine’s economy, offset the cost of American assistance, and guarantee Ukraine’s long-term prosperity and security.”

    • We’re still gangstering Ukraine, but at least the tables have turned to Russia: “Ceasefire 'in Russia's hands,' Ukraine says after US meeting in Saudi Arabia.” And there’s good vibes that Secretary of State Marco Rubio has once again found his spine.

• 📉 Trending Down: Free speech … retirement … CEO endorsements … polling … polling … religiosity … small business confidence … the CHIPs Act? …

• Chart(s) of the Day: Via JPM’s 15th annual energy paper:

Ah, so that’s why Anthropic was able to raise more

If you want to profit from the AI wave there are a host of ways to do so. You can use AI tools, build something, and try to sell it. Or you could back founders doing the same. If you have lots of capital, you can even get into the game of placing bets on AI model companies.

That last option is risky. AI model companies like OpenAI and Anthropic and Mistral consume oceans of cash, and are competing not only with one another, but the entire fleet of open-source AI models built by companies from Meta to DeepSeek.

So why are investors pouring capital into Anthropic and its peers like they are the last boat of a sinking island? Simple. The closed-source AI model approach to generating lots of revenue off the AI wave is going pretty damn well. Here’s Juro Osawa, Natasha Mascarenhas and Stephanie Palazzolo from The Information:

[Anthropic’s] annualized revenue—a measure of the past month's revenue multiplied by 12—has grown from $1 billion at the end of last year to $1.4 billion as of earlier this month, according to a person who has seen the numbers.

As a refresher, 40% growth from a $1 billion base in a single quarter is incredible. Bonkers. Outlandish. Nigh-unbelievable. However, the data point is believable because OpenAI is also growing like a weed. There’s gold in them closed AI model hills.

If you want a piece of Anthropic, however, you had best be ready to pay up. The company’s most recent $61.5 billion valuation gives the company an effective 44x ARR multiple today. That number will decline as the year goes on and the company grows, but remains scalding.

There is reason to believe that Anthropic has lots of room to grow, however. Manus, the recent AI sensation, uses Anthropic on the backend. That’s a lot of API calls to profit from, on Anthropic’s side of the server rack.

And I recently spoke with the CEO of Replit — interview on TWiST, coming out in the next week or so — whose company actually turned back from building its own AI models in favor of what Anthropic has on offer. (Official notes here.) Those are big endorsements from companies building our AI future. Bullish.

IPO Watch

Lost somewhat amidst a trade war and gyrating asset prices, the Times reported that Figma “has met with investment banks in recent weeks to discuss an initial public offering that could come as soon as this year.” This is huge news for several reasons: