Open models continue taking share. Not just tokens, more $ now spent on open models than OpenAI. Positive for the AI infra trade. Open models taking share shift $ margin from the model layer to the infra and app layers.

Extraordinary share gains for OpenAI vs. Anthropic over the last two months. Per Openrouter, OpenAI has gone from 20% share to 50% share vs. Anthropic (meaning Anthropic has gone from 80% to 50%) since June.

More on AI pacing: Sarah Friar CFO of OpenAI yesterday on CNBC: “from where I sit today there is so much opportunity to drive growth that I am still highly focused on getting more compute to keep that flywheel going.” Sachin Katti VP of Compute Strategy at OpenAI @sk7037 yesterday: “The way we will make sure frontier models are safe and aligned is by spending compute. So the counterintuitive point is that we’ll need even more compute to make sure future models are more safe and aligned.” If you thought “pacing” was negative for AI infrastructure demand, think again. Almost as bullish as open-weight AI taking share but not quite.

The way that Anthropic and OpenAI are going to “pace” the frontier is by spending more time and more *compute* on alignment, monitoring and evals. The frontier labs that choose to “pace” likely spend slightly more money on compute at the cost of lower margins. That’s it.

Wild 24 hours for AI and lots of different proposals have been made. TLDR; the only *tangible* new fact is that OpenAI and Anthropic are going to have embedded 3rd party evaluators from unknown organizations with Dario floating METR as a possibility. Having 3rd party evaluators is smart as there is no Section 230 style liability shield for model outputs and showing a “duty of care” will be important in future litigation. Several internet companies might have gone bankrupt without Section 230 so limiting liability really matters. There are minimal investment implications from this single new fact, but I do think that for anyone who wants a “smoother for longer” cycle then most constraints are good: wafers, watts, real rates and spreads. Excessive regulation is a different matter but I don’t think we are anywhere close to this even if the vector changed over the last 24 hours. To summarize the events: Dario made the most maximalist proposal of the weekend: embedded 3rd party evaluators, a national regulatory regime for models beyond a certain capability/ingredient threshold, a broad international regulatory pact between democracies, stricter limits on compute/distillation for China and then a different international regulatory regime that encompasses China. Before there is a national regulatory regime, he wants a Sherman act waiver so that Anthropic can safely coordinate with OpenAI and other frontier labs without antitrust fears. TBF, this latest proposal is much less maximalist than some of his prior proposals like “Policy on the AI Exponential,” where he advocated for an FAA for AI. I believe he is sincere in his beliefs. And despite all the protestations, all of this would also probably be good for his business over the long-term. Sam agreed that embedded 3rd party evaluators were a good idea and stated they would implement them. Again, this is smart as should help limit future liability. Elon said “Dario is right” and later specified that “Dario is right that there should be some oversight. Peer review of AI by competitors is the right way to start this off.” This would be a MPAA like self-regulatory structure for AI with regular calls between the labs plus a process where each new model is evaluated for safety by competitors for a 1-2 week period before being released. That is *wildly* different from Dario’s proposal and in-line with what David Sacks has been proposing. Elon also stated that nothing was going to slow down open-weight models. Demis said that Dario’s essay was a “step in the right direction.” Dario also said that he was also open to Demis’ idea of a FINRA like self-regulatory structure as part of his proposal. David Sacks had a thoughtful post where he said that Dario and Sam should pace unilaterally, called the antitrust waiver a cartel request and denied that METR was truly independent given their ties to Anthropic. Sriram Krishnan, former White House AI advisor, noted that it would be important to have the 3rd party evaluators come from independent organizations that are not affiliated with any lab, which is basically an indirect statement about the relationship between METR and Anthropic which Sacks was explicit about. Clem from Hugging Face said they were open to being a neutral 3rd party evaluator, which is interesting especially if Jensen was consulted before that post. Alexander Wang from Meta noted that alignment would be an increasing focus going forward. An executive order seems likely after all this and the language in this EO is going to be really important. It is possible to democratize and distribute AI broadly and safely without centralizing it in the hands of a few corporations who might each become more powerful than any single government. I do not want a few humans in control of intelligence. I want us all to have our own intelligences that reflect our own values and human variation in all of its richness. Intelligence distribution over intelligence centralization FTW.

High confidence prediction: all these Anthropic people come back after 6 months. I think they are sincere in their beliefs, but their actions are very calculated and coordinated with a specific goal in mind: regulation. Better for 🇺🇸 for AI to be distributed and democratized.

I applaud my friends for giving their time, effort and money to help veterans with PTSD and victims of trauma. They are sincerely trying to do something good for the world and I believe they have already made a real difference to many veterans.

Anthropic pre-IPO gamesmanship post. Pure speculation but sharing as curious for thoughts. Anthropic shifted from gross to net ARR accounting and stripped out both Meta and Chinese distillation from their $65 billion ARR number. Meta speculated to be over $5 billion in ARR so taking them out means they can easily weather it when Meta turns them off shortly after being public, which is widely expected. Also decreases the odds of Meta turning them off, watermelon quality dependent. All smart. Then release Fable 5.1 so OpenAI feels confident releasing Astra. Vibes here on Astra are really good btw. I think that Astra was probably better than Anthropic was expecting. Now there are whispers that Anthropic has solved Navier-Stokes, which would be super impressive. Anthropic probably releases Fable 5.2, which should be better than Astra unless something is awry, sometime before the IPO. Likely also planning on showing a significant reacceleration in ARR in September which will of course leak to the press. Grok 4.7, Meta’s Watermelon and ChatGPT 6.1 all likely coming in the next 6 weeks as well. All those labs are confident about their roadmaps in a way I have not seen in the last 18 months. And we will see about Gemini 4. Competitors get a vote in all these plans. Grok Bot feels like the best agentic harness yet for enterprise use cases and Instinct is a promising agentic harness for consumer use cases. Should see variations of both from competitors soon. Grok Bot remains transformational for my use cases. And all this is happening into a continued acceleration in overall AI demand. Wild times. As an aside, I think Krishna might turn out to be an exceptional CFO. His former Blackstone colleagues speak super highly of him. Going to be important as communicating clearly to Wall Street if they decide to shift their compute from inference to training will be difficult to digest the first time. Probably worth studying Amazon’s invest and then “check-in” margin strategy from 2010 through maybe 2016, which investors eventually understood.

The Hugging Face acquisition is important for America and I think Nvidia will be a good steward for the ecosystem. The Poolside transaction may end up mattering even more. I think Jensen is likely to bring American open-weight AI to the frontier, which is going to be awesome for America. We might see a multi-billion $ training run from Nvidia in the next 18 months for Nemotron v5-6 that is easy for customers to post-train and optimize for their own use case. Would be cool to see a 10 trillion plus parameter American open-weight model. If the best open-weight base is American, cheap to run, and actually post-trainable, then people, companies, labs, and governments can own their own intelligence instead of renting it from a company that might not share their values. Would be good for freedom to have a rich variety of AIs that reflect our own individual human preferences. And for the sake of the clarity, I think cheaper, specialized open-weight intelligence might end up making frontier tokens more valuable!

AI was seasonal in 2024-2025. Growth decelerated during the summer (students/people work less is the theory) and reaccelerated after Labor Day. This year, AI accelerated in July/August led by OpenAI, Grok and open-source. And today is the first time I’ve ever seen this:

Releasing Fable 5.1 before Astra is quite a flex. Makes me think Fable 5.2 is ready to go. So much gamesmanship between Anthropic and OpenAI right now. And I am very much looking forward to the next version of Grok. Exciting times.

Talking to brilliant physicists who have thought about orbital compute for 3 hours and are convinced it will never work makes me think of this Keanu Reeves quote: “I'm at that stage in life where I stay out of arguments. Even if you say 1+1=5, you're right. Have fun."