alt Hacker NewsNobody subsidizes LLM APIs. There is a reason to subsidize free consumer offerings: those users are very sticky, and won't switch unless the alternative is much better.
There might be a reason to subsidize subscriptions, but only if your value is in the app rather than the model.
But for API use, the models are easily substituted, so market share is fleeting. The LLM interface being unstructured plain text makes it simpler to upgrade to a smarter model than than it used to be to swap a library or upgrade to a new version of the JVM.
And there is no customer loyalty. Both the users and the middlemen will chase after the best price and performance. The only choice is at the Pareto frontier.
Likewise there is no other long-term gain from getting a short-term API user. You can't train out tune on their inputs, so there is no classic Search network effect either.
And it's not even just about the cost. Any compute they allocate to inference is compute they aren't allocating to training. There is a real opportunity cost there.
I guess your theory of Opus 4.1 having massive margins while Opus 4.5 has slim ones could work. But given how horrible Anthropic's capacity issues have been for much of the year, that seems unlikely as well. Unless the new Opus is actually cheaper to run, where are they getting the compute from for the massive usage spike that seems inevitable.
LLM APIs are more sticky than many other computing APIs. Much of the eng work is in the prompt engineering, and the prompt engineering is pretty specific to the particular LLM you're using. If you randomly swap out the API calls, you'll find you get significantly worse results, because you tuned your prompts to the particular LLM you were using.
It's much more akin to a programming language or platform than a typical data-access API, because the choice of LLM vendor then means that you build a lot of your future product development off the idiosyncracies of their platform. When you switch you have to redo much of that work.