I wrote this essay as a submission to Dwarkesh Patel's blog prize, though I have been meaning to write this up for a while.

Usually, for a company to become profitable, they need to increase revenue, decrease costs, or some mixture of the two. For AI companies in their current form, I think there is a third way they can become profitable that looks like increasing revenue but is distinct from what they are currently doing. Namely, internal deployment where they spin up internal companies.

First, the AI companies currently aren’t facing a lot of pressure to become profitable. That's partially the reason that OpenAI and Anthropic are the first companies to reach ~900 billion dollars valuation and be cash flow negative. They’ve had the luxury of not being profitable and focusing on growth because the market has been willing to fund their growth. This allows for ideologies within the companies to remain that eventually might not continue to fly, like “we are going post-economic, money won’t matter” or “we will build the machine god and ask it to make money”. But eventually, companies will be forced to become profitable. There is only about ~another round of capital left [...]

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First published:
May 11th, 2026

Source:
https://www.lesswrong.com/posts/ARRe4qjcuaRDBfARc/how-the-ai-labs-make-profit-maybe-eventually

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Narrated by TYPE III AUDIO.