When you look at AI, right now, it has one major use case that people are really willing to pay for: coding. That means Cursor and, to a lesser extent, Replit. Let’s take Cursor as an example: it is built on top of other companys AI.
This is a problem, because Cursor doesn’t have a service to sell without making calls to other company’s AIs and those companies can raise prices and Cursor has to eat it.
As Zitron notes, this is what actually happened recently:
A couple of weeks ago, I wrote up the dramatic changes that Cursor made to its service in the middle of June on my premium newsletter, and discovered that they timed precisely with Anthropic (and OpenAI to a lesser extent) adding “service tiers” and “priority processing,” which is tech language for “pay us extra if you have a lot of customers or face rate limits or service delays.” These price shifts have also led to companies like Replit having to make significant changes to its pricing model that disfavor users….
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- On or around June 16 2025 — Cursor changes its pricing, adding a new $200-a-month “Ultra” tier that, in its own words, is “made possible by multi-year partnerships with OpenAI, Anthropic, Google and xAI,” which translates to “multi-year commitments to spend, which can be amortized as monthly amounts.”
- A day later, Cursor dramatically changed its offering to a “usage-based” one where users got “at least” the value of their subscription — $20-a-month provided more than $20 of API calls — in compute, along with arbitrary rate limits and “unlimited” access to Cursor’s own slow model that its users hate.
- June 18 — Replit announces its “effort-based pricing” increases.
- July 1 2025 — The Information reports Anthropic has hit “$4 billion annual pace,” meaning that it is making $333 million a month, or an increase of $83 million a month, or an increase of just under 25% in the space of a month.
In other words, Anthropic, which still isn’t making money even now, increased its prices and Cursor and Replit were forced to pass those price increases on to their customers, and made their products worse.
American AI isn’t profitable. Each call costs more than anyone is charging their customers. And since there are very few AI models (OpenAI, Anthropic and X, basically), anyone who uses these services is subject to having prices suddenly increase. Indeed, since none of these companies is making money, it’s hard to see how anyone could expect anything but price increases.
Now here’s the thing about Deepseek, a Chinese AI. Its run costs 97% less than American AI. You’d think that American AI companies, seeing this, would have looked at how Deepseek did it, but they aren’t, they’re piling on the spending and costs.
And here’s the second thing: Deepseek is open source. You can run it on your own servers and you can build on it.
So: 30x cheaper and you can’t be hit with sudden but entirely to be expected price increases.
Why would you use American AI? (No, it’s not that much better.) The only real reason is legal risk: America wants to win the AI race and it’s willing to use sanctions to do so.
But if you’re in a country outside the Western sphere you’d be insane to use American AI. Absolutely nuts. And even if the Western sphere, building off American AI is incredibly risky.
So Chinese AI is going to win. Sanctions may slow it down, but open source and 30X cheaper is one hell of a combo.
It didn’t have to be like this. OpenAI wasn’t supposed to be a for profit enterprise and Deepseek’s methods of lowering costs could be emulated. But that doesn’t seem to occur to American AI companies.
American tech is completely out to lunch. Absolutely insane. A thirty time cost differential is not something you can just ignore, nor is the fact that American AI companies absolutely will have to raise prices, and raise them massively.
So, yet again, China is going to win, because American corporate leaders are, apparently, morons.
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The current plan is 35% tariffs on everything not covered by the USMCA trade deal.
If we were not in overshoot, the environment would not be degrading so severely: massive loss of insects, mammals, acidifying oceans, climate change, rain water that isn’t safe to drink, etc, etc… We’re eating into the carrying capacity of the Earth, producing more than the Earth can sustainably produce, and damaging the Earth in ways which will take ages to fix. Some of them, like loss of biodiversity, are not fixable on any human lifespan.
Both China and Japan have been moving hard to “gerontorobotics” (not sure if that’s a word yet.) They know there won’t be enough care workers, so they’re moving to robots which can help people live who are still mostly OK but just old, and they’re also working on robots that can help invalids and semi-invalids, including getting them into and out of bed, helping them bathe and use the washroom and so on.
If you think they wouldn’t do it to you, you’re in lalaland. They’ve proved they are OK with mass murder, and even if you’re white, don’t think it would save you. Look at Trump’s massive health care and food cuts, or Labour’s Starmer taking away aid from disabled people and cutting off heating for old folks, not to mention both being completely callous towards the exploding number of homeless people. In America far more homes are empty than there are homeless people, yet all the vast majority of politicians do is criminalize homelessness more and more.