The First Derivative of Inference

AI inference has become the fastest-growing market in technology, projected to reach $250 billion within seven years, surpassing the database market. Companies like Anthropic, Google Cloud, Datadog, and Twilio are benefiting as "first derivatives of inference," with Datadog reporting that AI customers represent 80% of its annual recurring revenue despite being only 20% of its total customer base. For pre-AI software companies, the only path to growth is reselling inference or profiting from customers purchasing large volumes of it.

The fastest-growing companies in AI & software are either selling AI directly or reselling inference. At worst, they are the first derivative of inference. Inference is the largest & fastest growing market in technology today, surpassing the database market & projected to be three times the size within seven years at $250 billion. 1, Anthropic has booked $9b & $10b in consecutive months. 3 Google Cloud is growing 63% at an $80 billion run rate. For public software & infrastructure companies that predate AI, there are two standouts so far : Twilio & Datadog. Both of these companies are benefiting as the first derivatives of inference. They don’t sell inference primarily, but anyone building AI systems needs to understand how they perform, & agentic companies with voice use Twilio. “The number of spans sent to our LLM Observability product nearly tripled quarter-over-quarter.” — Olivier Pomel, CEO, Datadog Q1 2026 Earnings Call As a result of AI growing so spectacularly, there are huge power law dynamics. “We now have over 6,500 customers sending data for one or more of our AI integrations. Though this is only 20% of total customers, they represent about 80% of our ARR.” — Olivier Pomel, CEO, Datadog Q1 2026 Earnings Call 5 This is also true for another element of core infrastructure, voice & SMS via telephone. “Voice reimagined through the lens of AI is increasingly an entry point to the Twilio platform for AI natives & enterprises alike.” — Khozema Shipchandler, CEO, Twilio Q1 2026 Earnings Call 6 A few customers can drive tremendous gains. This level of concentration is characteristic of the current cycle. 7 https://tomtunguz.com/index.xml fn:7 For any pre-AI company, the key question must be put at the board level : how do we either resell inference or benefit from our customers buying huge volumes of it? That’s the only way out of the Saaspocalypse.