Hello and welcome to Eye on AI. In this edition:
Why Palantir CEO Alex Karp is wrong about the frontier AI labs. Autonomous ransomware is here, a cybersecurity firm claims. China considers restricting foreign access to leading AI models. Anthropic finds part of LLMs functions like an aspect of human consciousness. AI safety standards are slipping, report says.This week, we have some exciting news right here at Fortune. We’re launching a brand new vodcast called Fortune AI Weekly, which I’m co-hosting with Bea Nolan. You can think of it a bit as an extension of what we do here at Eye on AI—bringing you our thoughts on the biggest AI news of the week, highlighting some of Fortune’s great AI reporting, and sometimes bringing you exclusive interviews with key AI builders, thinkers, founders, funders, and leaders. You can check out the vod on our YouTube channel here.***Among the AI news that made headlines last week was Alex Karp’s rant against the foundation model companies. The Palantir CEO went on CNBC Wednesday ostensibly to discuss a new partnership between Palantir and Nvidia to provide a “sovereign AI infrastructure” to the U.S. government and critical industries. The collaboration involves the use of Nvidia’s Nemotron open source models along with Palantir’s Artificial Intelligence Platform (AIP) that is an application layer connecting those models to data, along with offering data security and governance. But that’s not what wound up making headlines. Rather, after prefacing his remarks by saying “I’m not throwing shade” at OpenAI and Anthropic, Karp proceeded to toss Mordor levels of shadow at the frontier AI labs.“Something has gone completely wrong,” he said. “The basic view among enterprises in this country is ‘I’m going to chillax and waste my time with tokens, I’m going to get no value, and their going to get my IP.'” He then said this was not shade but “reporting.” He doubled down on these points several times, saying that companies were getting no value from the tokens they are purchasing from the frontier labs and that they are risking transferring their crucial business IP to these AI vendors.So does Karp have a point? Well, kind of. But only if you squint. And much of what Karp said was either self-serving, inaccurate, or contradictory—or all three.
ROI is lagging, but no one is ‘chillaxing’ about it
It’s true that many large companies are worried that they aren’t yet seeing enough of a return on investment from deploying AI and are fretting about how much tokens are costing them, particularly when using the most advanced AI models in agentic use cases. (The fact that many large companies are concerned about this contradicts Karp’s claim that they are simply “chillaxing.”) But certainly some companies are reporting value—particularly in software development and customer service. And, for those that are not, it is often because they have not prioritized the most strategically essential use cases or figured out how to reengineer their workflows across the company to take best advantage of the technology.At one point in the CNBC interview, Karp said “why are they charging for tokens, if it is so valuable?” He suggested that if the foundation models worked as well as the AI model vendors claim, it would be better to offer to complete an entire task for the customer and charge a percentage of the value derived. This, in fact, is how Palantir prices its offerings (so there’s the self-serving bit). And it is what many consulting companies selling AI services are now starting to do. But it certainly isn’t how software has traditionally been priced. It also makes little sense for a general purpose technology to use a value-based business model. After all, the electric company charges you for every unit of electricity you use, not for the value of what you do with those electrons. Microsoft, for that matter, charges you a set amount to use Microsoft Word and Excel—it doesn’t try to charge you a percentage of the deal you won because your PowerPoint deck impressed in the pitch meeting.Plus, if Karp says one of enterprises’ main complaints about the frontier AI labs is that they are “stealing alpha” (i.e. stealing the know-how that gives a business its competitive edge) that would be even more of a concern with a business model in which the AI companies performed tasks for customers rather than selling them tokens. (This is another of the contradictory things he said.) Some consulting firms and some cloud providers do offer managed services for customers—but customers are usually only willing to outsource tasks that they see as non-core to their business.
Little evidence of AI labs ‘stealing alpha’
As to Karp’s argument that the frontier labs are stealing IP from customers, there’s no evidence that this is literally true, at least not in the way Karp seemed to suggest. The leading AI vendors all have policies that say they don’t have direct access to enterprise customers’ prompts, outputs, or data and that they don’t use these interactions to train future models, unless those customers specifically opt-in to letting the vendor do so. (More on that special case in a second.)
Both OpenAI and Anthropic do talk about using anonymized and deidentified customer data to conduct economic research on how their models are being used, but even this is only done for messaging traffic that comes into their consumer-facing services or their direct APIs, and not for customers who access the models through secure cloud services, such as Microsoft Azure, Amazon Bedrock, or Google Vertex–which is the way most large enterprises access these models.So, for most large businesses, especially most large businesses that are not themselves in the technology sector, what Karp is claiming is nonsense. If you are Archer-Daniels-Midland or Boeing, there’s not much chance Anthropic is going to steal your IP and start producing corn or churning out jumbo jets.
Still, a few companies have reason to be worried—Palantir is one of them
But there is a category of businesses for which Karp may have a point. Anthropic, OpenAI, and Google DeepMind do all have “design partners” in various industries, and these partners often get early access to help test the latest models that these AI labs are working on. And as part of those partnerships, the labs often do have a lot more access to information about how those enterprises are using the models.There has been at least one case where that access may have been used by one of the AI labs to build a competing product. That case involves Anthropic and Figma. As The Information first reported last month, Anthropic had been collaborating with both Figma and Canva on the development of a Claude for Design tool. Mike Kreiger, Anthropic chief product officer, even had a seat on Figma’s board. But then Figma pulled out of the launch and Kreiger suddenly stepped down from the board after Figma discovered that the product Anthropic was building competed much more directly with its own product features than Anthropic had, at least in Figma’s view, been letting on. According to the Information’s reporting, Figma CEO Dylan Field told attendees at a private Sequoia Capital-hosted event that Anthropic was “not consistently candid in their communications” with Figma about the scope of the Claude design tool.
Other supposed instances of AI vendors using access to customer data to then compete with those customers come from sources with axes to grind—many of them investors in Palantir. Venture capitalist Jason Calacanis, an earlier Palantir backer, has alleged that Anthropic used data from Cursor, an AI coding assistant that was a heavy user of Anthropic’s Claude models, to help develop Claude Code, the viral Anthropic product that then largely eclipsed Cursor in popularity. Venture capitalist Chamath Palihapitiya has pointed out that Anthropic partnered with Eli Lilly and other pharmaceutical companies, before recently saying that it intended to start its own drug development program. (Anthropic has characterized this as a way to hone its own Claude of Science tools and it is unclear if Anthropic would try to commercialize any drug candidates itself or would partner with a pharma company for that part of the process.) Besides being an early Palantir investor, Palihapitiya is co-host of the “All In” podcast with David Sacks, who has no love lost for Anthropic either.Even so, the accusation that Anthropic intends to actually enter all of these verticals directly, rather than simply build tools that will make their models easier to deploy into these verticals—which is hardly the same thing—seems far-fetched. Again, if you’re most Fortune 500 companies, Anthropic or OpenAI are not going to start competing head-to-head with you.In fact, the best example of frontier AI labs stealing data in order to build a competing product comes from my own industry, the media business. Here frontier AI labs have definitely hoovered up vast troves of copyrighted material in order to train AI models that often compete directly with publications as sources of factual information. (The same could be said for publishing, music, and fine art.) But somehow I don’t think that’s what Karp had in mind.A friend in finance suggested that what has really gotten under Karp’s skin—as well as the skin of some normally more sober executives, such as Microsoft’s Satya Nadella, who interestingly has been making some similar claims lately about the rapacious nature of the frontier AI labs —are not Anthropic’s and OpenAI’s business models, but their likely IPOs. Those IPOs will no doubt be in high demand. And to raise the liquidity necessary to buy OpenAI or Anthropic shares, institutional investors may look to sell other tech names—tech names such as, well, Palantir. Remember just because you’re paranoid, doesn’t mean they aren’t out to get you.With that, here’s more AI news.Jeremy Kahnjeremy.kahn@fortune.com@jeremyakahn
This story was originally featured on Fortune.com
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