AI's pricing power problem

Good morning,

It seems all anyone can talk about these days is AI adoption (guilty), but what aboutadoption of old-school tech? As it turns out, several industries still give a fax. Can you guess the top industry still paying for fax services in 2026?

In today’s letter:

Is an AI slowdown in the cards?
New Ramp data: top SaaS vendors
The city most likely to work on Saturdays

Token pricing power falls ahead of anticipated mega-AIPOs

AIPOs in the spotlight: Ever since Anthropic and OpenAI confidentially submitted their IPO paperwork in June (within days of each other, of course), there’s been a slew of headlines digging into their financials. Recently, for example:

The Financial Times reported that OpenAI told investors that its annualized revenue was approaching $50B in September, significantly less than the $70B that was previously reported.
Reuters reported that Anthropic, whose IPO could value it at more than $2T, had a loss of $42B last year. Meanwhile, revenue 12x’d to ~$4.6B, according to the prospectus seen by Reuters.

While official figures aren’t public, these appear to be incredibly fast-growing businesses with credibly large losses (credible because of how costly it is to train and run AI).

Those losses could widen as AI token prices fall.In June, we wrote that the next phase of the AI wars could be fought on the pricing field, and that’s exactly what we’re seeing happen now. Locked in a fierce two-sided competition, OpenAI and Anthropic have announced a series of back-to-back price cuts and rolled out cheaper AI models. The result is clear in the data:

Ramp AI Index shows that AI spend is falling even as token volumes increase. And it’s not because U.S. companies are switching to cheaper open-source models like China’s DeepSeek.
“This decline in spend is driven almost exclusively by competition between OpenAI and Anthropic,” said Ramp economist Ara Kharazian, noting that open source models make up less than 5% of business spend on Ramp.

Looking ahead: “The introduction of highly performant standard and lite models, and highly token-efficient models… will threaten OpenAI and Anthropic’s revenue growth among businesses,” Kharazian predicted.

But falling token prices aren’t the only factors portending a slowdown.

Ramp AI Index shows that the rate of AI business adoption growth is slowing, while per-employee AI spend at the top 1% of adopters declined nearly 10% in August from July.
Meanwhile, businesses are changing AI model providers more than ever. With low vendor loyalty and no lock-in, the OpenAI-Anthropic price war isn’t likely to cool any time soon.

“This intense competition is music to the ears of model users,” wrote Ryan Stevens, Director of Applied Science at Ramp. “It could be an early sign that AI models are becoming commodities.”

And after the Fed started hiking interest rates, we could see compressed valuations as the discounted cash flow and risk-reward equation changes.

See the Ramp charts pointing to cracks in the AI thesis.

Video generation software is rising

While competition is pushing AI spend down, the increased adoption of expensive image and video generation models will push AI spend up, according to Ramp economist Ara Kharazian.

Higgsfield AI and Runway, which both sell AI for image and video generation, featured on our fastest-growing vendors list this month.

Watercooler Data

San Francisco isn’t beating that 996 reputation any time soon… We’re talking 9 a.m. to 9 p.m., six days a week.

Even if SF employees aren’t going full 996, they’re still the most likely (by far) to expense lunch on a Saturday. The least likely to be working Saturdays: Miami workers.

Follow our X account for more data like this.

Signals Shortlist

A handful of tech stocks are masking an ugly S&P 500 problem (Yahoo Finance)
EU to cap Chinese hybrid car imports at 350k each year (Bloomberg)
Not just Oura: IPO postponements have accelerated in Q3 (CNBC)
Meta releases its first frontier model, Muse Wonder (TechCrunch)
Delta cuts profit outlook as surging fuel costs tighten grip (Bloomberg)

🗓️ Leading Events

Tuesday, October 13: Earnings expected from JPMorgan Chase, Wells Fargo, Citi, Goldman Sachs, UnitedHealth, Johnson & Johnson, and Domino’s

Wednesday, October 14: Consumer Price Index (September). Earnings expected from ASML, Bank of America, Morgan Stanley, and BlackRock

Thursday, October 15: Producer Price Index. Earnings expected from TSMC, Charles Schwab, BNY Mellon, U.S. Bancorp, and J.B. Hunt

Friday, October 16: Earnings expected from M&T Bank, Truist Financial, The Travelers Companies, and Citizens Financial Group

Stay ahead of the curve with Leading Indicators

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