The rapid rise in the cost of using frontier artificial intelligence models is reshaping the enterprise AI market, creating an opening for infrastructure providers that help companies deploy cheaper open-source models while retaining greater control over their proprietary data.
One of the biggest beneficiaries is Fireworks, an Nvidia-backed AI cloud startup that said it has surpassed a $1 billion annualized revenue run rate, underscoring how demand is shifting beyond the largest AI model developers.
The San Mateo, California-based company announced Thursday that it has raised $1.5 billion in fresh funding at a $17.5 billion valuation, a fivefold increase in annualized revenue from a year ago.
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“We’re seeing super-linear demand,” Fireworks co-founder and Chief Executive Officer Lin Qiao told CNBC. “This is a once-in-a-lifetime opportunity to have this kind of market.”
The milestone is notable because it highlights a growing segment of the AI ecosystem that is benefiting from enterprise concerns over both the cost and strategic implications of relying exclusively on proprietary models from companies such as OpenAI and Anthropic.
While OpenAI and Anthropic have each attracted valuations exceeding $800 billion this year, Fireworks’ rapid growth suggests that many businesses are increasingly looking beyond frontier AI labs in search of lower-cost and more customizable alternatives.
Fireworks operates in the inference cloud market, providing infrastructure that allows developers to deploy and optimize open-source AI models rather than relying solely on proprietary systems. The company competes with major cloud providers including Amazon and Google, as well as AI infrastructure startups such as Baseten and Together AI.
It has also expanded into GPU infrastructure for AI model training, putting it alongside specialized cloud providers such as CoreWeave, Lambda and Nebius.
Its growth reflects broader changes in enterprise AI spending.
Chief financial officers and technology executives are becoming more focused on controlling AI costs as model usage scales. Instead of paying premium prices for every AI workload, many companies are selectively deploying open-weight models for specialized applications where comparable performance can be achieved at substantially lower costs.
“Our cost compared with the equivalent-quality closed model is five to 10 times cheaper,” Qiao said.
The trend aligns with comments made this week by Microsoft Chief Executive Satya Nadella, who argued that companies should be able to use AI models without surrendering the institutional knowledge that gives them a competitive advantage. Nadella’s remarks echoed recent comments by Palantir CEO Alex Karp, who said enterprises increasingly want to “own the means of production” instead of depending entirely on external AI providers.
Fireworks has positioned itself squarely around that proposition. Rather than competing directly with OpenAI or Anthropic in developing frontier foundation models, it enables customers to build customized AI systems using their own proprietary data.
While OpenAI and Anthropic provide what Qiao described as “generalized intelligence,” Fireworks aims to deliver “specialized intelligence” by allowing enterprises to refine open models for specific industry use cases.
The platform hosts a wide range of open-source models, including offerings from Chinese developers DeepSeek, MiniMax and Z.ai, as well as open-weight models released by OpenAI. Customers can combine these models with proprietary enterprise data to improve performance for domain-specific tasks without exposing sensitive information to external model providers.
The company’s expanding partnerships also illustrate how the AI infrastructure market is becoming more collaborative rather than winner-take-all.
In March, Fireworks announced a partnership with Microsoft that integrates its services with Microsoft’s Foundry platform. The arrangement gives Microsoft customers access to Fireworks’ infrastructure while allowing Fireworks to leverage Microsoft’s enterprise distribution network.
“Through Microsoft we can get much bigger reach,” Qiao said.
The company relies on computing capacity from more than 20 infrastructure providers, including Microsoft, giving customers flexibility beyond the traditional hyperscale cloud model.
Its rapid expansion also challenges assumptions that Amazon, Microsoft, and Google will dominate every layer of enterprise AI infrastructure. Investors have increasingly rewarded companies serving specialized AI workloads. DigitalOcean shares have climbed 149% this year as AI-related demand accelerated, while GPU cloud provider CoreWeave, which raised $1.5 billion through its IPO last year, now commands a market capitalization of about $42 billion.
Fireworks’ operational scale has expanded dramatically alongside its financial growth. The company now processes approximately 40 trillion AI tokens every day, according to Qiao.
For comparison, Google disclosed in May that developers process roughly 19 billion tokens per minute through its AI models, equivalent to more than 27 trillion tokens daily. OpenAI said in March that its developer platform handled around 15 billion tokens per minute, or roughly 22 trillion tokens per day.
Although token counts are not directly comparable because pricing, workloads, and model architectures differ, the figures underline how quickly Fireworks has become one of the industry’s largest AI inference platforms. Its customer base has also diversified significantly. Last year, AI coding startup Cursor accounted for about half of Fireworks’ revenue. Today, Qiao said the business is substantially more diversified.
Cursor itself has reduced its dependence on OpenAI and Anthropic by developing its own proprietary Composer model. SpaceX agreed in June to acquire Cursor in a $60 billion stock transaction expected to close this quarter, further highlighting the strategic value of companies that control their own AI infrastructure rather than relying exclusively on external providers.
Other enterprise customers include Elastic, GitLab, and MongoDB.
Founded in 2022 by former Meta executive Lin Qiao and six co-founders, Fireworks currently employs about 200 people. The company plans to triple its workforce to around 600 employees by the end of 2026 as it expands its engineering organization, acquires additional GPUs and builds a dedicated enterprise sales force after years of relying primarily on self-service customer adoption.
The funding round was led by Atreides Management, Index Ventures and TCV, with participation from Nvidia, Evantic and Lightspeed Venture Partners.