Today’s theme is threading the needle. Now imagine doing it at high speed and scale. At breakneck speed, with lots of variables and lots of high-probability uncertainties.

That is what is going on for at least three entities I want to talk about today. Anthropic. Elon, with SpaceX & Tesla. And the US government, against ALMOST the entire US AI industry, on the whole question of what to do about China and its AI open source models.

This is the AI Tech Wave at the point where strategy runs into mounting execution risks. Three events, each with my Take, then my Overall Take. Plus a Gadget AI on the ‘Whack-a-China-Drone’ US inexplicable FCC ban, and two questions. Let’s get started.

(1) Anthropic Launches Claude Opus 5. Slightly Under Fable 5, at Half the Price.

MP TAKE: The frontier labs are trying to leapfrog each other. And to stay ahead of the government’s concerns about geopolitical and cyber security safety restrictions at the same time. We had ‘The Blip 2.0,’ three weeks with Anthropic’s lead models, Mythos and Fable 5, shut down and then reopened. We had similar uncertainty around OpenAI’s GPT 5.6, which was finally allowed to be sold and distributed to customers around the world.

Well, Anthropic today launched Claude Opus 5. It sits above their Opus 4.8 model, which has been their workhorse product. And it now stands at a capability that is slightly under Fable 5 or Mythos on most benchmarks. But at half the price. And that’s important.

Very importantly, Opus 5 is now at roughly the same price as OpenAI ChatGPT/Codex’s 5.6. Remember, these two companies are fighting each other with closed models, with their best frontier models up front, for enterprises and especially AI coders, on a la carte pricing at the highest tiers.

And you’ve got customers who are eagerly looking to get access to these models. At the same time, they’re trying to thread their own needle between token maxing for their developers and users, and token budget management. That is another threading-the-needle exercise, and their customers are doing it at scale. We’re talking about tens of billions of dollars committed every month around the world. Not just around the frontier models here, but also with models from Google, Meta, Elon’s Grok 5, and of course the whole host of open-source AI models coming from Kimi K3, and Moonshot in China, DeepSeek, Alibaba Qwen 3.8 Max, and a lot of others.

So at the high level, Anthropic is absolutely trying to thread the needle between the priorities of managing all of their models and the concerns about security and gating by the regulators. There’s a lot of balancing going on at very high speed and very high stakes. All of it ahead of mega-AI IPOs for two companies potentially valued at a trillion each. Anthropic going out as early as this year, OpenAI next year.

Sources, in narrative order: Anthropic Introducing Claude Opus 5. For longtime readers: ‘Anthropic recasts Mythos as Fable 5, with safety and pricing gates’ in AI-RTZ #1114; and ‘Anthropic’s AI Compute Constraints throttling growth’ in AI-RTZ #1080.

(2) SpaceX slows down Falcon 9 Customers to Force the Starship Transition

MP TAKE: Elon is slowing allocations to his Falcon 9 launch customer base. That’s his most successful rocket to date, at over 650 launches, up and down. Remember the booster gets reused, and that took the cost of these low earth orbit space launches down by a factor of ten versus government-financed rockets, whether US or Russia based. That was the big boost SpaceX got years ago. No pun intended.

The next one is Starship, which has multiple times the capacity of a Falcon 9. And over time it is supposed to be entirely reused, not just the booster. There is dramatically more technology, science and economic complexity in bringing back the rest of the rocket. That component goes much higher up, has to come back down through the atmosphere, with all the heat-shield issues. That has not been done at scale yet. Starship has its 13th launch today. It’s still testing. They’ve had booster and other issues around it.

He still has to prove Starship is going to be entirely reusable, which would bring launch costs down by another factor of ten, to hundreds of dollars a kilo versus thousands. After Falcon 9 already brought it from tens of thousands per kilo down to thousands. Those are the scale jumps we’re talking about. And Elon has to execute that, because it is the entire enthusiasm case for the SpaceX IPO.

That IPO, in June, took the stock towards $2.25+ trillion at its peak. It’s now around $1.5 trillion. Down about a third from the high. So this is the question. Will they manage the transition from one very successful workhorse rocket to a much larger, potentially fully reusable Starship, over the next year and a half?

And all of this requires a huge orchestration, almost ballet-like, of tooling, parts, components and supply. Against all the customers and their launch requirements and windows. Everyone from the military to defense to the spy agencies, and regular customers too, are dependent on Falcon 9. And so is Starlink, which is the core business of SpaceX, launching all of those ten thousand plus low earth orbit (LEO) satellites.

That too requires Starship. The Starlink satellites are going from version two to version three. Version three is much more capable, much faster on transmission speeds to the ground and back. And they’re much heavier. So they require Starship. Falcon 9 can’t carry them. That’s another reason Elon needs to thread the needle at a faster pace on this Starship transition. Impacting his customers. He’s scaling back some of the bookings over the next couple of years. And those customers are now going to be sitting and crossing their fingers that Starship is successful.

That is the highwire act being performed by SpaceX. And remember, SpaceX is Elon’s second public company, at a valuation of a trillion and a half. The other one is Tesla, which reported earlier this week and is down about 14 to 15%. It lost $200+ billion, and is now at about $1.3 trillion.

The speculation is mounting that at some point in the next year or so, Elon may merge Tesla into SpaceX. SpaceX being the higher valuation, and the one he controls more from a governance and voting-rights point of view. So it’s in his interest to merge the two. Look at the prediction markets like Kalshi and the odds are as high as 65 to 70% that it happens in the next year or two. Some investors argue 80% or higher. It’s part of Elon’s playbook, merging the slightly underperforming company in his portfolio into the one with the more exuberantly priced valuation.

And there too, he is balancing a bunch of other needles. Falcon 9 to Starship. Starlink version two to version three. On the Tesla side, ramping Optimus robots into the millions, from barely a few dozen that are barely working, with a whole manufacturing-ecosystem question behind it: supply chains with China, batteries and the like. Then robotaxis, which are in half a dozen-ish cities against Waymo, which is in far more cities with thousands more vehicles, at a Level 4 self-driving rate versus Level 2++ for the robotaxis trying to scale.

A lot of Tesla’s valuation depends on this. I’d argue that of the $1.3 trillion, about half a trillion each is riding on the humanoid robots and on the robotaxi side. So a lot of aspirational, exuberant, ‘HODL’ (hold on for dear life) valuation in Tesla.

Same thing at SpaceX, where the core business, Starlink, is probably valued at about half a trillion by most pragmatic analysts. The rest of it, the trillion-plus, is all on AI data centers in the sky, terafabs in the sky, and the other aspirational things. Going to Mars. Bases on the moon. Launch facilities on the moon. All of these things that are more in the realm of science fiction than in real life.

I’ve been on the record talking and writing about this. All of that is going to take years more than what the markets are assuming. The professional buy-side and sell-side analysts are assuming this stuff happens in the next five years or less. I would argue most of it happens in five years or more. That’s another critical needle to thread.

Sources, in narrative order: Bloomberg SpaceX Is Turning Away Falcon Customers in Major Bet on Starship; CNBC Tesla, Alphabet Lose Hundreds of Billions in Value in Post-Earnings Stock Plunge. For longtime readers: ‘SpaceXAI IPO outlines Elon’s boundless AI Ambitions’ in AI-RTZ #1066; and ‘Elon Musk boosts SpaceX/xAI pre-IPO story with Terafab’ in AI-RTZ #1034.

(3) The White House Weighs Open-Source Restrictions. Three Companies Sit It Out.

MP TAKE: The White House is weighing its options on open-source restrictions from China. A lot of the pro-open-source and pro-AI advisors to President Trump have now left the White House. I’m talking about David Sacks, the VC who was the top AI czar there. He’s gone.

Other forces are coming into the White House that are arguing for, and listening to, more open-source AI restrictions. And this is all a chess game. I’ve written a lot about this ahead of the second meeting between President Xi and President Trump. The last one, you’ll recall, was a few months ago in China. This next one is September 24 at the White House. So there are a lot of chess moves being played here.

In the meantime, you’ve had a whole host of Silicon Valley big tech companies actively lobbying the US government. Nvidia, Microsoft, Meta, IBM, Palantir and others, arguing fervently at the White House: please do not restrict open-source software from China. Because it helps US companies, it helps US customers, and it helps the case for US leadership in AI around the world.

Against that, you’ve got not two but three companies that are particularly absent from signing these letters. Of course, Anthropic, which has been leading the charge against open source AI from China. On ‘stealing with distillation’ charges and more. OpenAI, which reluctantly jumped into this, and I wrote about that a couple of days ago. And most surprisingly, Google.

Google, which would arguably benefit from more open source. Especially because they’re trying to scale up Google Cloud against the number two, Microsoft Azure, and the number one, Amazon AWS. But they are being tactically short-sighted, trying to thread their own needle between open and closed on their models.

These are business politics and geopolitics being played at global scale, ahead of big meetings coming up at the presidential level from both countries. And there are a lot of business flows back and forth in play here too. That is the threading the needle going on across the next two or three months, on this very critical issue of how the US manages its way through Chinese open-source models, or restrictions on them. We’ll see how that turns out.

Sources, in narrative order: The Information US Investigates Chinese AI Companies’ Access to Chips Amid Moonshot Accusations; The Information Meta, Microsoft, Nvidia and Others Sign Letter Defending Open-Source AI; CNBC Nvidia, Microsoft, Meta Warn Against ‘Premature Restrictions’ of Open-Weight Models; The Information Silicon Valley Unites Against Anthropic Over Chinese AI Restrictions; WSJ Inside China’s All-Out Push to Catch Up With American AI Chips. For longtime readers: ‘Anthropic & OpenAI now against China open source AI’ in AI-RTZ #1156; ‘Setting the Stage again, the US China AI Theater ahead of 2nd Xi/Trump meeting’ in ARD 123; ‘China ramping up in AI vs US, open source and beyond’ in AI-RTZ #1153; and ‘How Nvidia and Apple can be global US open source AI champions vs China’ in AI-RTZ #1089.

MP OVERALL TAKE

All of this sits under the theme of threading the needle. These are all extraordinarily high-stakes ventures. Obviously for the companies themselves, whether it’s Anthropic, or SpaceX and Tesla and Elon. And most importantly for the US government, in the context of US leadership over the next 20 or 30 years on the AI Tech Wave. The way the US has benefited from every previous tech wave. All the way from the mainframe computer to the PC, the internet, mobile, cloud.

This is a set of decisions that, if it’s not executed correctly, threading the needle on so many variables, is going to be more detrimental to long-term US interests than not.

And here is the part that makes the argument for me, and it came up at the very end of today’s episode. Today’s AI-RTZ #1157 is about frontier models slipping their cribs, including OpenAI’s model and the Hugging Face incident. Ironically, that particular incident was managed, controlled and contained using open-source models from China, by Hugging Face. Without those, they would have been in the dark on what happened, how and why. Literally. If they had been reliant only on the closed-frontier model companies, and on government restrictions driven by cybersecurity concerns, they’d have had no way to see what was happening.

So open source came to save the day. On the very week Washington is weighing whether to restrict it.

So very much to focus on. So many needles here, so little time.

GADGET AI

The US Drone Ban, and Whack-a-Drone at the FCC

MP TAKE:

Here too there’s an issue that is also about threading the needle. And what I’m talking about is the US drone ban. Some of you may not know what I’m talking about.

Drones have been another technology, basically robots in the sky, where the US and China are in a race. China has the world’s biggest and most successful company, DJI, which has provided 70 to 80% of the drones around the world. They’re the Nvidia of drones.

And the FCC, under its very politicized leader Brendan Carr, in December, three days before Christmas 2025, put out a unilateral ban on overseas drones, especially from China, on national security grounds. No other details. And a lot of observers basically say this was more political than not. What that has done is basically take away most options for users of drones.

We think about drones as consumer things. Wedding pictures and videos, real estate pictures and videos. And there is a big market from a consumer point of view. But the bigger market is military, of course, and on the commercial side, where lots of industries use drones.

But the US does not have as many drone companies as we would like. Most of them are in China, because the components and the ecosystem for manufacturing these things at scale are all in China. Just as they are for robots, self-driving cars, solar panels and everything else. In fact, the handful of venture-backed US drone companies like Skydio, which started as consumer drone companies, are now all focused on military and defense applications. Weapons-type things as well. Obviously because of all the drone success in Ukraine versus Russia.

So drones are a very important industry. They’re not that visible for most people. But there is a political football thing going on with the FCC in terms of banning these things. And there is a sub-industry that has come up in faking drones, where you build components from China and Asia, assemble them here, and sell them as US drones. This article in The Verge highlights all of it, if you want to go into the weeds. There’s a whack-a-drone situation going on, and a huge amount of threading the needle in terms of US interests versus China.

It’s a situation that keeps getting more urgent, where the FCC has to make some clear decisions. Because there aren’t that many good options either way. If we continue to keep the ban, then we are going to starve ourselves of drones and drone development in the United States. And that is more self-harm to US interests.

Sources, in narrative order: The Verge Whack-a-Drone. For longtime readers: ‘On Land, Sea, and Air’ in AI-RTZ #348.

QUESTIONS

Q1. Have I found drones actually useful?

Answer: Yeah, they’re fun. They’re great gadgets. And I’ve been a drone nut from the beginning, a decade or more ago. They’re great for amazing videos and pictures. Real estate. Wedding scenarios. Family functions. A lot of fun.

Q2. What’s the major area for improvement?

Answer: It’s two things. Batteries and self-navigation. Both are getting better, especially the self-navigation part. There are now small drones that are almost automagical in how they fly, and that will track you without you having to put on a headset or work a controller. And very soon, and already in China, you can just talk to them over your AirPods and they’ll do things for you.

But the bigger issue is on the battery side. These things typically have a 15, 20, 30 minute battery. So you walk around with a lot of chargers and spares. They’re still very useful things. And drones are still much more useful on the commercial side than on the consumer side. For now.

WRAP

Today’s AI-RTZ #1157 Frontier Models Slip Their Cribs. Growing Pains, Not a Great Escape. It’s a discussion about frontier-model risks. How they’re breaking out of their cribs, as it were, and potentially breaking into systems they’re not authorized to. We have the OpenAI versus Hugging Face situation. I talk in detail about what happened technically there, and why it’s not as alarming as it seems. These are early days of a young technology, and the core companies are trying to figure it out.

AI Ramblings Daily on AI-RTZ is here to think through AI and reset. Together.

Tomorrow, the Saturday Weekly Roundup. And Sunday, The Bigger Picture. Then back here Monday.

Have a great weekend. Thanks for joining us today, AI Curious Folk. Stay tuned.

— MP

Full Source Reading

For the broader context, see the canonical sources for ARD 126, in today’s narrative order:

Event 1. Anthropic Launches Claude Opus 5

• Anthropic, Introducing Claude Opus 5

• AI-RTZ #1114, Anthropic recasts Mythos as Fable 5, with safety and pricing gates · AI-RTZ #1080, Anthropic’s AI Compute Constraints throttling growth

Event 2. SpaceX Parks Falcon 9 Customers Ahead of Starship

• Bloomberg, SpaceX Is Turning Away Falcon Customers in Major Bet on Starship · CNBC, Tesla, Alphabet Lose Hundreds of Billions in Value in Post-Earnings Stock Plunge

• AI-RTZ #1066, SpaceXAI IPO outlines Elon’s boundless AI Ambitions · AI-RTZ #1034, Elon Musk boosts SpaceX/xAI pre-IPO story with ‘Terafab’

Event 3. The White House Weighs Open-Source Restrictions

• The Information, US Investigates Chinese AI Companies’ Access to Chips Amid Moonshot Accusations · The Information, Meta, Microsoft, Nvidia and Others Sign Letter Defending Open-Source AI · CNBC, Nvidia, Microsoft, Meta Warn Against ‘Premature Restrictions’ of Open-Weight Models · The Information, Silicon Valley Unites Against Anthropic Over Chinese AI Restrictions · WSJ, Inside China’s All-Out Push to Catch Up With American AI Chips

• AI-RTZ #1156, Anthropic & OpenAI now against China open source AI · ARD 123, Setting the Stage again, the US China AI Theater ahead of 2nd Xi/Trump meeting · AI-RTZ #1153, China ramping up in AI vs US, open source and beyond · AI-RTZ #1089, How Nvidia and Apple can be global US open source AI champions vs China

Gadget AI. The US Drone Ban and the FCC

• The Verge, Whack-a-Drone · AI-RTZ #348, On Land, Sea, and Air

Clips from today

Clip 1. US Drone Ban: A Political Move?

Watch on YouTube Shorts

The FCC banned overseas drones three days before Christmas, on national security grounds, with no other details.

MP Take: China has the world’s biggest and most successful drone company in DJI, at 70 to 80% of drones worldwide. They’re the Nvidia of drones. And the FCC under its very politicized chairman put out a unilateral ban with nothing else attached. A lot of observers basically say this was more political than not. What it has done is take away most options for users of drones.

Clip 2. SpaceX’s Starship: The Highwire Act

Watch on YouTube Shorts

Elon is forcing the Starship transition on his own customers. Flight 13 goes today.

MP Take: Starlink is launching all of those ten thousand plus satellites, and it needs Starship, because the V3 satellites are much more capable, much faster on transmission, and much heavier. Falcon 9 can’t carry them. So Elon needs to thread the needle at a faster pace, forcing it as it were on his customers, scaling back bookings over the next couple of years. And the customers are now going to be sitting and crossing their fingers that Starship is successful. That is the highwire act being performed by SpaceX.

Clip 3. Elon Musk’s SpaceX: Falcon 9 to Starship Transition

Watch on YouTube Shorts

Two factors of ten. That is the whole enthusiasm case for the SpaceX IPO.

MP Take: Falcon 9 already brought launch costs down from tens of thousands of dollars per kilo to thousands. A fully reusable Starship would bring it down by another factor of ten, to hundreds of dollars a kilo. Elon has to execute that, because it is the entire enthusiasm case for the SpaceX IPO, which is now down about a third from its June peak. The question is whether they can manage the transition over the next year and a half. And all of it requires a huge, almost ballet-like orchestration of tooling, parts, components and supply.

Clip 4. Drones: Fun & Improvements

Watch on YouTube Shorts

Have I found drones useful? Yes. And here is what still needs to get better.

MP Take: They’re fun, they’re great gadgets, and I’ve been a drone nut from the beginning, a decade or more ago. Great for amazing videos and pictures, real estate, wedding scenarios, family functions. The major areas for improvement are two things: batteries and self-navigation. Self-navigation is getting better, with small drones that are almost automagical, and in China you can already just talk to them over your AirPods. The bigger issue is batteries. These things typically have 15, 20, 30 minutes, so you walk around with a lot of chargers.

About AI Ramblings Daily (ARD), and AI-RTZ

Both are daily. Both are free. Both are about AI. But they’re different mediums carrying different messages.

AI-RTZ is the morning text, a deeper written take on one idea, published by at least 5 AM EST. Today: post #1157.

AI Ramblings Daily is the afternoon video + podcast, my ad hoc takes and perspective on the day’s AI issues and news flow, around 20 minutes, with short 1-2 minute clips for quick topic views. Today: episode #126.

Subscribe to either or both on michaelparekh.substack.com. They run as separate Sections you can opt into or out of.

Links used in today’s show (already embedded inline above; listed here for reference)

Take 1. Anthropic Launches Claude Opus 5:

• Anthropic, Introducing Claude Opus 5

• AI-RTZ #1114, Anthropic recasts Mythos as Fable 5, with safety and pricing gates

• AI-RTZ #1080, Anthropic’s AI Compute Constraints throttling growth

Take 2. SpaceX Parks Falcon 9 Customers Ahead of Starship:

• Bloomberg, SpaceX Is Turning Away Falcon Customers in Major Bet on Starship

• CNBC, Tesla, Alphabet lose hundreds of billions in value in post-earnings stock plunge

• AI-RTZ #1066, SpaceXAI IPO outlines Elon’s boundless AI Ambitions

• AI-RTZ #1034, Elon Musk boosts SpaceX/xAI pre-IPO story with ‘Terafab’

Take 3. The White House Weighs Open-Source Restrictions:

• The Information, US Investigates Chinese AI Companies’ Access to Chips Amid Moonshot Accusations

• The Information, Meta, Microsoft, Nvidia and others sign letter defending open-source AI

• CNBC, Nvidia, Microsoft, Meta warn against ‘premature restrictions’ of open-weight models

• The Information, Silicon Valley unites against Anthropic over Chinese AI Restrictions

• WSJ, Inside China’s all-out push to catch up with American AI chips

• AI-RTZ #1156, Anthropic & OpenAI now against China open source AI

• ARD 123, Setting the Stage again, the US China AI Theater ahead of 2nd Xi/Trump meeting

• AI-RTZ #1153, China ramping up in AI vs US, open source and beyond

• AI-RTZ #1089, How Nvidia and Apple can be global US open source AI champions vs China

Gadget AI. The US Drone Ban and the FCC:

• The Verge, Whack-a-Drone

• AI-RTZ #348, On Land, Sea, and Air

Q1 + Q2:

• (No external sources. MP’s own answers on drones.)

Companion text:

• AI-RTZ #1157, Frontier Models Slip Their Cribs. Growing Pains, Not a Great Escape.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here.)

Subscribe to AI: Reset to Zero for daily AI Ramblings + Sunday Bigger Picture posts.