There is no moat for LLM giants

Inception launched Mercury 3, a large language model that uses diffusion to match mid-level models from Anthropic and OpenAI, Cloudflare announced a new set of System One models, and MiniMax M3.1 Flash was released on the open model front.

Three LLM providers. Three companies that aren't household names. And two of those three are pursuing a different technical approach than the big AI labs. By 2 pm EDT on any given day there will be a handful of new LLMs (from Meta, SpaceXAI, any of the Chinese open model leaders) to check out.

Are we really supposed to think that Anthropic and OpenAI are going to be able to hold a premium price for any of their models?

Repeat after me: There is no moat for LLMs. Even if Anthropic and OpenAI disappeared tomorrow there would be leaner, meaner providers to take their place and challenge the well-funded hyperscalers.

You can find the details on Mercury, Cloudflare and MiniMax, but the reality is it doesn't matter because there will be something new in a few hours. The AI value is in the trust, AI harness (until everyone and their mother has one), model portfolio management and overall system you design for your business outcome.

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This no moat reality became obvious last week. A CEO showed me his OpenRouter LLM bills. There was a mix of models, probably a few dozen, with a few pricey LLMs and a lot of cheap ones. Loyalty? Absolutely none. He was managing to optimize price and performance. If one LLM fades, it will simply be replaced by another.

We'll all be that CxO soon and that fact makes me really wonder whether Anthropic and OpenAI are going to be able to hold their private market inflated valuations when they go public.

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