Patel jokes that transformers are the most capitalist invention because spending more money reliably improves them.
“I like to joke, like, transformers are the most, like, capitalist thing that's ever been invented because you just throw more money at it, it gets better.”
Patel argues open source AI lacks software's feedback loops because reusing models requires significant compute and expertise.
“fundamentally, I would say that that's because open source AI does not have the same feedback loops as open source software.”
Patel argues most AI value accrues to users, not to companies building or deploying AI.
“But most of the AI value that's been generated does not accrue to the companies building the AI or deploying it. It actually deploy it actually accrues to the user.”
Patel calculates $100B AI revenue requires $250B infrastructure with five-year depreciation at 50% margins.
“That $50,000,000,000 of COGS needs to burn on infra, which cost roughly with if a five if you're talking about five year depreciation, call it $250,000,000,000,”
Patel reports Anthropic achieved profitability and positive free cash flow in April and May 2025.
“Anthropic is free cash flow positive, and they are profitable in q two. Even in April. In April, they closed April's books. They were profitable.”
Patel says less compute efficiency means fewer tokens and intelligence for everyone
“@kipperrii Means less compute efficiency so less tokens and intelligence to everyone.”
Patel argues AI business transformation has severe upfront spend spike then major cost efficiency gains.
“Like you spike up on spend a lot for the one time and then you spike down a lot and your cost efficiency is way better.”
Patel mocks Anthropic ARR measured as last hour at 2PM times 8760
“Holy shit have y'all seen Anthropic ARR? As measured by last 1 hour at 2PM times 8760”
Patel says AI enables PE to upgrade systems at drastically different scale and pace than before
“@GringoInvesting @SemiAnalysis_ They did but the scale and pace it can be done is drastically different”
Patel warns ARR as annualized run rate often represents one-time lumpy revenue, not recurring
“Remember kids When someone says ARR is not annual reoccurring revenue It's annualized run rate, btw most this shit is 1 time and lumpy”
Patel observes AI founders with revenue are transforming into neoclouds with value-added services
“God damnit, every one of my AI founder friends who actually have revenue are now just transforming into neoclouds with value add on top”
Patel argues first-party ASICs have no residual value if OpenAI goes bankrupt, making them unfinanceable
“@TShirtnJeans2 @GavinSBaker @maxkan Why would someone finance a first party ASIC that has no residual value if OAI is bankrupt”
AI model providers are capturing only a small fraction of the economic value their models create.
“Most of the value that these models generate does not get given to OpenAI and Anthropic,”