This is a very damning (and long) article about the MISSING potential profitability of AI startups that are trying to build products on top of generative AI platforms. A bit of course language, but very insightful analysis. A quotation: …fundamentally, generative AI does not let companies build something new. Anyone that builds a generative AI […]
This is a very damning (and long) article about the MISSING potential profitability of AI startups that are trying to build products on top of generative AI platforms. A bit of course language, but very insightful analysis. A quotation:
…fundamentally, generative AI does not let companies build something new. Anyone that builds a generative AI product is ultimately just prompting the model, albeit in increasingly more-complex ways at the scale of something like Claude Code — though Anthropic has the advantage of being one of the main veins of infrastructure. This means that a generative AI company owns very few unique things beyond their talent, and will forever be at the mercy of any and all decisions that their model provider makes, such as increasing prices or creating competing products.
“AI Is A Money Trap.” Ed Zitron’s Where’s Your Ed At, 6 Aug. 2025, www.wheresyoured.at/ai-is-a-money-trap/.
Summarizing his opinion of the financial positions of both OpenAI and Anthropic, Ed writes”
…long story short, these companies are unprofitable with no end in sight, don’t even make that much money in most cases, are valued more than anybody would ever buy them for, do not have much in the way of valuable intellectual property, and the two biggest players burn billions of dollars more than they make.
I’m not a financial analyst or economic expert, but Ed’s forecast is very persuasively argued and is quite dismal for not just generative AI companies and investors, but also the near-term health of the United States and global economies.
If Ed’s thoroughly cited analysis is correct, an AI bubble bust is eminent:
What is missing is any real value generation. Again, I tell you, put aside any feelings you may have about generative AI itself, and focus on the actual economic results of this bubble. How much revenue is there? Why is there no profit? Why are there no exits? Why does big tech, which has sunk hundreds of billions of dollars into generative AI, not talk about the revenues they’re making? Why, for three years straight, have we been asked to “just wait and see,” and for how long are we going to have to wait to see it?
AI Is A Money Trap (Edward Zitron, 6 Aug 2025)
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