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Hi all,

Suffocated by export controls, Chinese AI labs have developed an efficiency moat that may define the AI market’s development over the coming years. My report from a trip to China.

In this Sunday’s edition:

• Anthropic powers into Main Street as Microsoft and OpenAI consciously uncouple

• Who should really control your AI?

• Voltaire, the Enlightenment entrepreneur

Anthropic’s CFO Krishna Rao gave a fascinating interview on Patrick O’Shaughnessy’s podcast. It’s a cornucopia of insights: for one, the firm’s enterprise customers increased their spending by a factor of five over the past year. That 90% of Anthropic’s code is written by Claude Code is well known, but Krishna says that 90% of finance reporting is now AI-driven as well. Cowork is growing faster than Claude Code (which grew from zero to $1 billion in just six months). Krishna’s been on quite the ride himself – he joined Anthropic two years ago when revenues hit $250 million and now presides over annualized revenues approaching $50 billion – a fivefold increase in as many months. Recommend a listen.

Elsewhere: Anthropic leads OpenAI in business adoption, according to Ramp.

OpenAI and Microsoft are no longer exclusive. OpenAI now gets to play with other resellers and Microsoft gets better access to the startup’s AI, as well as drops complicated revenue-sharing arrangements.

It’s been a profitable marriage, if not an entirely happy one.

Microsoft’s $13 billion OpenAI investment has yielded over $30 billion in revenue in the two years since ChatGPT’s launch. OpenAI was the biggest customer of Microsoft Azure’s AI business, ploughing $23 billion into the hyperscaler. (Our estimates suggest up to 60% of Azure’s AI revenue came from OpenAI). Microsoft’s operating margin expanded by 3.9% over the last three years.