Anthropic's slow response and technical-focused approach to the Fable shutdown reveal a failure to grasp that managing political relationships is now as critical as model development. This is a new, non-technical competency required for frontier AI companies, integral to their survival and success.
As illustrated by SpaceX's $60B acquisition of Cursor, a high valuation is more than a vanity metric; it's powerful M&A currency. It allows a company to make large, strategically vital acquisitions with less shareholder dilution, effectively turning market perception into a tangible competitive advantage.
The government's demand to 'patch' Fable's jailbreak misunderstands its core functionality. The model was designed for cyber defense, refusing to review insecure code but generating patches when asked to fix bugs—a feature, not a flaw. This highlights the deep technical gap between regulators and AI labs.
Contrasting government actions—forcing Anthropic to block foreign access while simultaneously defending xAI's data centers for military operations—reveal a coherent strategy. Frontier AI is no longer just a commercial product; it's being treated as a strategic national asset subject to direct government control and intervention.
Elon Musk's xAI initially appeared to lag, but the real victory was building massive supercomputers. By leasing this compute power to rivals like Google and Anthropic, SpaceX's 'Neo Cloud' became its primary revenue source, revealing a highly profitable infrastructure-first AI strategy.
While headlines focused on OpenAI's staggering $38.5B net loss, the underlying numbers show a profitable core business. The company generated $13B in 2025 revenue on just $7.5B in direct costs, indicating that selling tokens for inference is a high-margin activity separate from massive R&D costs.