Palantir CEO Alex Karp is wrong about the threat Anthropic and OpenAI pose to most enterprises. That doesn’t mean he doesn’t have something to lose

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 “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........

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