$6.6B raise. The company loses $5B per year. So all this money literally gives them just an extra ~year and change of runway. I know the AI hype is sky high at the moment (hence the crazy valuation), but if they don't make the numbers make sense soon then I don't see things ending well for OpenAI.
Another interesting part:
> Under the terms of the new investment round, OpenAI has two years to transform into a for-profit business or its funding will convert into debt, according to documents reviewed by The Times.
Considering there are already lawsuits ongoing about their non-profit structure, that clause with that timeline seems a bit risky.
OpenAI finances is a bit tricky since most of their expenses are the cloud costs while their biggest investor/shareholder Microsoft invested in them with mostly Azure credit so although their finances seem unsustainable, I think the investors are banking in if the things went bad Microsoft will buy them out and make even small ROI like what they did with Inflection.
Most of the loss comes from hefty cost of inference, right? OAI runs on Azure, so everything is expensive at their scale: the data, the compute, and GPU instances, and storage, and etc.
I'd venture to guess that they will start building their own data centers with their own inference infra to cut the cost by potentially 75% -- i.e., the gross markup of a public cloud service. Given their cost structure, building their own infra seems cheap.
Building datacenters will take a significant amount of time. if they don’t have locations secured then even more so.
Given their scale and direct investments from Microsoft, what makes you think this is any cheaper? They’ll be getting stuff at or near cost from azure, and Azure already exists and with huge scale to amortize all of the investments across more than just OpenAI, including volume discounts (and preference) from nvidia.
I assumed that Microsoft gave them discount and credits as investment, but the cost by itself is not near zero.
Of course the cost isn’t near zero, but is it “at cost”. If it is, then them building a datacenter wouldn’t save anything, plus would have enormous expenses related to, well, building, maintaining, and continuously upgrading data centers.
Are there enough gpus available at the scale that they need them?
Same thing was said of Netflix, of Uber, etc...
Venture capital loses money to win marketshare, tale as old as time
Were Microsoft, Google, Amazon and Tesla/Twitter(x), and a whole bunch of other gigantic (Chinese aswell) corporations trying to compete for the same market back then?
I don't think Netflix and Uber had even a fraction of the competition that this field will have.
Neither had Zuckerberg giving free hikes and movies to people.
> if they don't make the numbers make sense soon then I don't see things ending well for OpenAI.
This is pretty much obvious just from the valuations.
The wild bull case where they invent a revolutionary superintelligence would clearly value them in the trillions, so the fact that they're presently valued an order of magnitude less implies that it is viewed as an unlikely scenario (and reasonably so, in my opinion).
You don't need science fiction to find the bull case for OpenAI. You just have to think it stands to be the "next" Google, which feels increasingly plausible. Google's current market capitalization is in the trillions.
In 2023 Google had $307.39B in revenue and $24B in profit last quarter (suggesting ~100B in profit this year). Meanwhile OpenAI is losing money and making no where near these sums.
That assumes that the revolutionary superintelligence is willing to give away its economic value by the trillions. (Revolutionary superintelligences are known to be supergenerous too)
It actually represents the scenario where they invent a revolutionary superintelligence that doesn't kill the VCs investing in the firm, and allows them enough control to take profit. In the top range ASI capacity outcomes, the sand god does not return trillions to the VCs.
This actually represents only the narrow "aligned" range of AI outcomes, so it makes sense it's a small one.
Judging by the ones I have met, the VCs probably believe that any kind of superintelligence would by definition be something that would like them and be like them. If it wasn’t on their side they would take it as incontrovertible proof that it wasn’t a superintelligence.
I am not sure who you have met, but I have mostly talked to VCs with the same range of optimism and concerns regarding AI as normal technologists.
>I don't see things ending well for OpenAI.
I mean, what exactly do you see happening? The have a product people love and practically incalculable upside potential. They may or may not end up the winners, but I see no scenario in which it "doesn't end well". It's already "well", even if the company went defunct tomorrow.
>that clause with that timeline seems a bit risky.
I'm 99% certain that OpenAI drove the terms of this investment round, they weren't out there hat in hand begging. Debt is just another way to finance a company, cant really say it's better or worse.
I don't think it really matters how much people love their product if every person using it costs them money. I'm sure people would love a company that sold US$10 bills for 25c, but it's not exactly a sustainable venture.
Will people love ChatGPT et al just as much if OpenAI have to charge what it costs them to buy and run all the GPUs? Maybe, but it's absolutely not certain.
If they "went defunct" tomorrow then the people who just invested US$6bn and lost every penny probably would not agree with your assessment that it "ended well".
Model training is what costs so much. I would expect OpenAI makes a profit on inference services.
The hardware required is the same, just in different amounts.
It’s less (gross) expensive for inference, since it takes less time, but the cost of that time (per second) is the same as training.
Running models locally brings my beefy rig to the knees for about half a minute for each querry for smaller models. Answering querries has to be expensive too?
I seems like they not well, is the vast majority of outcomes. They dont have a profitable product or business today.
It seems that me most likely outcome is that they have one replaceable product against many and few options to get return commensurate with valuation.
My guess is that investors are are making a calculated bet. 90% chance the company become irrelevant, 10% chance it has a major breakthrough and somehow throws up a moat to prevent everyone else from doing the same.
That said, I have no clue what confidential information they are showing to investors. For all we know, they are being shown super human intelligence behind closed doors.
> That said, I have no clue what confidential information they are showing to investors. For all we know, they are being shown super human intelligence behind closed doors.
If that were the case, I wonder why Apple passed on this investment.
> The have a product people love and practically incalculable upside potential
I'm willing to bet that if you swapped out GPT with Claude, Gemini or Llama under the hood 95% of their users wouldn't even notice. LLMs are fast becoming a commodity. The differentiating factor is simply how many latest NVIDIA GPUs the company owns.
And even otherwise, people loving a product isn't what makes a company successful. People loved WeWork as well. Ultimately what matters is the financial statement. OpenAI is burning an incredible amount of money on training newer models and serving every query, and that's not changing anytime soon.
> I'm willing to bet that if you swapped out GPT with Claude, Gemini or Llama under the hood 95% of their users wouldn't even notice
You can say exactly the same about Google and Bing (or any other search engines), yet Google search is still dominant. Execution, market perception, brand recognition, momentum are also important factors, not to mention talent and funding.
Not everyone who wants to invest, can invest in this round. You may bet the investors are wrong, but they put money where their mouth is. Microsoft participate, even though they already invested $13b.
> The have a product people love and practically incalculable upside potential.
...yet they struggle to find productive applications, shamefully hide their training data and can't substantiate their claims of superhuman capability. You could have said the same thing about Bitcoin and been technically correct, but society as a whole moved in a different direction. It's really not that big of a stretch to imagine a world where LLM capability plateaus and OpenAI's value goes down the toilet.
There is simply no evidence for the sort of scaling Sam Altman insists is possible. No preliminary research has confirmed it is around the corner, and in fact tends to suggest the opposite of what OpenAI claims is possible. It's not nuclear fusion or commercial supersonic flight - it's a pipe-dream from start to finish.
Given the high risk, investors likely want a shot of earning at least a 10x return. $157 billion x 10 = $1.57 trillion, greater than META's current market capitalization. Greater returns would require even more aggressive assumptions. For example, a 30x return would require OpenAI to become the world's most valuable company by a large margin.
All I can say to the investors, with the best of hopes, is:
Good luck! You'll need it!
It's fine, Sam's bulletproof plan is to build AGI (how hard could it be) and then ask the AGI how they can make a return on their investments.
https://www.threads.net/@nixcraft/post/C5vj0naNlEq
If they haven't built AGI yet that just means you should give them more billions so they can build the AGI. You wouldn't want your earlier investments to go to waste, right?
How old is that though? They seem to be making revenue pretty well now, so I suspect this might be quite old?
Revenue isn't profit. They're burning money at an impressive rate: https://www.nytimes.com/2024/09/27/technology/openai-chatgpt...
I wouldn't even be surprised if they were losing money on paying ChatGPT users on inference compute alone, and that isn't even factoring in the development of new models.
There was an interesting article here (can't find the link unfortunately) that was arguing that model training costs should be accounted for as operating costs, not investments, since last year's model is essentially a total write-off, and to stay competitive, an AI company needs to continue training newer frontier models essentially continuously.
> I wouldn't even be surprised if they were losing money on paying ChatGPT users on inference compute alone
I'd be surprised it that was the case. How many tokens is the average user going through? I'd be surprised if the avg user even hit a 1m tokens much less 20m.
With o1? A lot.
Even for regular old 4o: You’re comparing to their API rates here, which might or might not cover their compute cost.
Training costs scale to infinite users making them a perfect moat even if they need to keep updating it. Success would be 10-100x current users at which point training costs at the current scale just don’t matter.
Really their biggest risk is total compute costs falling too quickly or poor management.
The funny thing about that statement is that if it actually does become true, all of those VCs (and Altman himself), whose job is ostensibly to find the optimal uses for capital, would immediately become obsolete. Heck, the whole idea that capitalism could just continue along in its current form if true AGI existed is pretty laughable.
There are so many things wrong in this statement (starting with "immediately"). Let's assume they built a system they claim is AGI. Let's assume its energy consumption is smaller than that of a small country. Let's assume that we can verify it's AGI. Let's assume its intelligence is higher than average human. That's many "ifs" and I omitted quite a few.
Now, the question is: would you trust it? As a human, a manager, a president? With the current generation, I treat is as a dumb but quick typist, it can create code much faster than I can, but the responsibility to verify it all is entirely on me. We would need decades of proof such an AGI is reliable in order to actually start trusting it - and even then, I'm not sure how safe it would be.
/All Gifts, Bestowed/ by Gayou is a great read that explores this topic.
Would you settle for a few days of testing in perfect conditions? Just kidding, companies don't care!
If anyone in the thread has used o1 or the real-time voice tools, it's pretty clear AGI is here already, so we are really talking about ASI.
You have no option but to trust an ASI as it is all-powerful by definition. If you don't trust ASI, your only option is to prevent it from existing to begin with.
Edit: please note that AGI ≠ "human intelligence," just a general intelligence (that may exceed humans in some areas and fall behind in others.)
> please note that AGI ≠ "human intelligence," just a general intelligence (that may exceed humans in some areas and fall behind in others.)
By this definition a calculator would be an AGI. (Behold -- a man!)
Meh, what I've seen is that we continually move the goalposts for AGI, and even GTP-3.5 would have been considered AGI by our standards from just 5 years ago.
But if I can't convince you, maybe Norvig can: https://www.noemamag.com/artificial-general-intelligence-is-...
Let’s say you gave o1 an API to control a good robot. Could it throw a football? Could it accomplish even the most basic tasks? If not, it’s not generally intelligent.
> Let’s say you gave o1 an API to control a good robot. Could it throw a football?
Maybe.
> Could it accomplish even the most basic tasks?
Definitely:
- https://youtu.be/Sq1QZB5baNw - https://youtu.be/K1TrbI0BaaU
The problems with central planning that capitalism ostensibly solves don't exist because of a lack of intelligence, but due to the impedance mismatch between the planner and the people.
Making the central planner an AGI would just make it worse, because there's no guarantee that just because it's (super)intelligent it can empathize with its wards and optimize for their needs and desires.
It has been known since the 1920s that capitalism isn't perfectly efficient. The competition has always been between an imperfect market directed by distributed human compute vs a planner directed by politicians directed by human computed.
It is an argument about signal bandwidth, compression, and noise.
The problem isn't AGI becomes the oracle central planner. The problem is AGI becomes the central planner, the government and everybody else who currently has a job.
I think there won't be just one AGI, no central planner. LLM abilities leak, other models can catch up in a few months.
I don't think the concern is that an AGI would become a central planner, but that an AGI would be so much better than human investors that the entire VC class would be outclassed, and that the free market would shift towards using AGI to make investment/capital allocation decisions. Which, of course, runs the risk of turning the whole system into a paperclip optimizing machine that consumes the planet in pursuit of profit; but the VC class seems to desire that anyway, so I don't think we can assume that a free market would consider that a bad outcome.
That VC class appears to really enjoy the frisson of bullshit, elaborate games of guess-what’s-behind-the-curtain, and status posturing. Remove that hedonistic factor and the optimization is likely to be much more effective.
A fair amount of evidence has existed for at least 50 years that a chimpanzee throwing darts at a wall can outperform most active fund managers, yet this has done nothing to reduce their compensation or power.
The problem with all such criticisms is that there is an implicit assumption that humans can be trusted.
I know human limitations. I don’t know AGI limtations.
Most humans can not lie all the time. Their true intentions do come out from time to time.
AGI might not have that problem - AGI might hide its true intentions for hundreds of years.
Have you… met humans?
Honestly, it isn't a bad plan at all.
Assuming money even makes sense in a world with AGI, that is.
In the Star Trek/Culture/Commonwealth equally distributed, benevolent AI, sure. In the I’ve-got-mine reality, I assume only the select few can speak with the AI and use it to control the serfs.
There's no future where OpenAI makes everyone else a "serf" though. In 1948 certain Americans imagined that the US could rule the Earth because it got the atomic bomb first, and they naively imagined that other countries would take a generation to catch up. In reality the USSR had its own atomic bomb by 1949.
That's what the competition with OpenAI looks like to me. There are at least three other American companies with near-peer models plus strong open-weights models coming from multiple countries. No single institution or country is going to end up with a ruling-the-Earth lead in AI.
America not using its nuclear advantage to secure its nuclear advantage doesn’t mean it couldn’t have.
I am not thinking some better LLM, but a genuine AI capable of original thought. Vastly superior capabilities to a human. A super intelligence which could silently sabotage competitor systems preventing the key breakthrough to make their own AI. One which could manipulate markets, hack every system, design Terminator robots, etc
I mean, it isn't a bad plan for VCs. Never said it's a good plan for us peasants. My opinion of sama is 'selling utopia, implementing dystopia' and that's assuming he's playing clean, which he obviously isn't.
As for a post-money world, if AGI can do every economically viable thing better than any human, the rational economic agent will at the very least let go all humans from all jobs.
Investors probably aren't expecting a 10x return on a late stage investment like this.
Don't some of these investors, such as Microsoft get access to run the models on their own servers as well as other benefits?
I thought Satya said Microsoft had access to everything during the Altman debacle.
My understanding is that Microsoft has already earned a large return, from incremental Azure revenues.
This is a company at a $4 bill annual run rate.
In times gone by this would be a public company already. It's just an investment in a company with almost 2000 employees, revenue, products, brand etc. It's not an early stage VC investment, they aren't looking for a 10x.
The legal and compliance regime + depth of private capital + fear of reported vol in the US has made private investing the new public investing.
Expected return is set by risk and upside, not offering size. What do you think the risk of ruin is here? I think there is a substantial chance that Open AI wont exist in 5 years.
I think later rounds generally have lower return expectations - if you assume the stock market will return ~10%/year, you probably only need it to 2X by IPO time (depending on how long that takes) for your overall fund's IRR to beat the stock market.
You would if it were the fund’s only investment. But it won’t be. And this is still not a mature company, as their expenses currently vastly outnumber revenue, so there’s always a chance of failure.
Your general sense that the later stage higher dollar figure raises look for a lower multiple than the earlier ones is correct, but they’d consider 2x a dud.
>You'll need it!
If they can IPO, they will easily hit a $1.5T valuation. All Altman would have to do is follow what Elon did with Tesla. Lots of massive promises marinated in trending hype that tickles the hearts of dumb money. No need to deliver, just keep promising. He is already doing it.
The difference is Tesla had a moat with the electric car market, there were no affordable and practical EVs 10 years ago. OpenAI is surrounded by competition and Meta is constantly releasing Llama weights to break up any closed source monopolies.
Tesla is still overvalued today with a moat that is more a puddle than anything. Elon realized that cars weren't gonna carry the hype anymore, so now it's all robotaxi, which will almost certainly be more vaporware.
I think he’s even past robo taxi and onto AI and robots that build robots that build robotaxis. I wish I were joking.
The Nissan Leaf was far more affordable than a Tesla 10 years ago and very practical for anyone living in a city.
While it was an affordable vehicle, saying that it was practical is an overstatement. Charging networks were abysmal and actually still are for non-Tesla compatible vehicles. If you had experience using EVgo and similar small networks you probably wouldn't sound as confident.
What's dogecoins valuation? Cardanos? Bitcoins? There is a nigh-infinite amount of capital ready to get entranced by a sexy story.
If OpenAI hits $100B in revenue, $15B in profit with a 50% CAGR they will likely be worth even more than Tesla was at those numbers.
Tesla has really dropped off on its 50% CAGR number so now it is worth half that.
It took around 20 years for Amazon to get to $15B profit, and over 10 years for Meta/FB. Both had very clear paths to profit: sales and ads. OpenAI did not yet demonstrate how they will be able to consistently monetize their models. And if you consider how quickly similar quality free models are released today, it's definitely raising questions.
Yeah, there's no upper limit to hype and exuberance.
As Isaac Newton once said, "I can calculate the motion of heavenly bodies, but not the madness of people."[a]
---
[a] https://www.goodreads.com/quotes/74548-i-can-calculate-the-m...
If they accomplish AGI first, they will be the world’s most valuable company, by far.
If they fall short of AGI there are still many ways a more limited but still quite useful AI might make them worth far more than Meta.
I don’t know how to handicap the odds of them doing either of these at all, but they would seem to have the best chance at it of anyone right now.
If AGI is accomplished, there’s unlikely to be a “secret sauce” to it (or a patentable sauce), and accomplishing AGI won’t by itself constitute a moat.
Aren't they proving the opposite of your proposed alternative already? A limited AI is not making them money and since every new model becomes obsolete within a year, they can't just stop and enjoy the benefits of the current model.
Billion dollars isn't cool, you know what is? A trillion dollars.
At their stage and size, it's probably 3x-5x. Still sky high!
Maybe they view it as at least a sure thing for a 2x return...
Another issue here is that at this value level they are now required to become a public company and a direct competitor to their largest partners. It will be interesting to see how the competitive landscape changes.
My understanding is that the company is burning $0.5+ to $1+ billion each month.
I'd say that's very high risk.
That is also much lower than Uber at its peak.
Uber's spending was directly attributed to growth. They were launching in new countries, new cities, new markets every day, and that required burning through an immense amount of money. Of course that growth didn't need to last forever, and once the service was fairly established everywhere the spending stopped.
OpenAI on the other hand has to spend billions to train every new iteration of their model and still loses money on every query you make. They can't scale their way out of the problem – scaling will only make it worse. They are counting on (1) the price of GPUs to come down in the near term or (2) the development of AGI, and neither of these may realistically happen.
Uber was a literally life-changing product with an obvious value for anyone. LLMs have neither benefit.
Every cafe, airport, school I've been to has people using ChatGPT or its competitors. Its obviously valuable for almost anyone. Just like how people cant imagine life before smartphones, people wont be able to imagine life before LLMs became ubiquitous. Its everywhere.
That's just not true. Source: a two-digit division.
Previous to this, they had about ~10B (via MS), and they've been operating for about 2 years at this scale. Unless they got this $$$ like a week away from being bankrupt, which I highly doubt.
Note: I'm not arguing they're profitable.
It is speculated that a majority of those 10B is Azure cloud credits. Basically company scrip. You can't pay Nvidia in the scrip, or the city electricity department, or even the salary.
If everyone is building datacenters, sell nuclear reactors.
You need to consider time and baseline growth. Google tells me Nasdaq CAGR for the past 17 years is around 17% so that will be just under 5x over 10 years. 10x over 10 years will be about 25%. High, but not as crazy as you suggest.
The investor will probably have no say or be told to stfu and leave if they try to do some stuff like forming an activist group
For “an” AI company, that can achieve market dominance, to achieve 1.57T market cap is not unrealistic.
I think the question is, is OpenAI that company and is market dominance possible given all other players? I believe some investors are betting that it is OpenAI, while you and others are sceptic.
Personally I agree with you, or rather hope that it is not, primarily as I don’t trust Sam Altman and wouldn’t want him to have that power. But so far things are looking good for OpenAI.
OpenAI feels like the most politicaly active with its storylines, flashy backstabs, and other intrigue.
But as far as the technology, we're drowning in a flood of good AI models, which are all neck to neck in benchmarks. Claude might be slightly stronger for my use, but only by a hair. Gemini might be slightly behind, but it has a natural mass market platform with Android
I don't see how a single player sticks their neck out without being copied within a few months. There is — still — no moat.
They haven't even started their own versions of AdWords.
Google's money printing is based on people telling Google what they want in the search bar, and google placing ads about what they want right when they ask for it. Today people type what they want in the ChatGPT search bar.
Difference is is that I can just switch to another LLM.
I cant really do the same for Google.
I wonder if these investors have a liquidation preference as they would in normal VC rounds. And if it's a 1x preference (as is normal) or if a higher multiple is built in.
$157B marketcap means they need to 20x their current revenue of roughly 400 million dollars by next year...
But the revenue has flatlined and you can't raise your existing users cost by 20x...
It truly is a mystery as to how anybody throwing other peoples money hopes to get it back from OpenAI
They made 300 million revenue last month, apparently up 17x from last year[1]. To get a P/E ratio of 20, assuming (falsely) that their spending holds constant, they'd need ~4x more revenue
[1]https://www.nbcnews.com/business/business-news/openai-closes...
For a P/E ratio of 20 they'd need to generate earnings (not revenue) of $7.85 billion, earnings are revenue less all costs.
> But the revenue has flatlined and you can't raise your existing users cost by 20x...
Why not? They’re already shopping a 2k/mo subscription option
I'm not justifying anything here but I think their revenues are expected to triple next year...now that doesn't mean they will of course. But why do you say they've flatlined?
After Theranos and WeWork, I'm always skeptical of any Pre-IPO "valuations".
For every Theranos and WeWork, there’s Uber, Coinbase, AirBnb. I know they didn’t raise as much as OpenAI, but it wasn’t insignificant amount of money burning before they became profitable with large market caps. It’s very strange times we’re living in.
Airbnb is down 10% since going public. Coinbase is down over 50%. I think some skepticism around pre-IPO valuation is warranted.
Have any of those become profitable?
Uber made a 1.1 billion profit last year.
AirBnB has been profitable for two years. Coinbase’s financials are complicated by them holding a substantial amount of cryptocurrency, but they’ve been profitable for two quarters even with significant losses there.
Yes, all of them are profitable.
Yup, I think all three are posting about 500M/quarter profits on average for the past year or so. Might be wrong though, I don’t really keep up with all of them.
I hope better competition appear before the enshittification begins.
As far as I understand it they're actually underwater on their API and even $20/month pricing, so we'll either see prices aggressively increase and or additional revenue streams like ads or product placement in results.
We've witnessed that every time a company's valuation is impossibly high: They do anything they can to improve outlook in an attempt to meet it. We're currently in the equivalent of Netflix's golden era where the service was great, and they could do no wrong.
Personally I'll happily use it as long as I came, but I know it is a matter of "when" not "if" it all starts to go downhill.
> additional revenue streams like ads or product placement in results.
It's largely flown under the radar but they appear to already be testing this:
> the enshittification
I've assumed that when AI becomes much more mainstream we'll see multiple levels of services.
The cheapest (free or cash strapped services) will implement several (hidden/opaque) ways to reduce the cost of answering a query by limiting the depth and breadth of its analysis.
Not knowing any better you likely won't realize that a much more complete, thoroughly considered answer was even available.
Or an answer that left out the fact that Pepperidge Farm remembers, Coke is life, and yo queiro Taco Bell.
"This hallucination was brought to you by the coca cola company."
Given how picky the ad industry can be about where their ads are being placed, I somehow suspect this is going to be complicated. After all, every paragraph produced is potentially plain untrue.
ChatGPT is valued $157BN?
What discount rate do you use on a cash burning non-profit?
negative times a negative is a positive
It’s just math, duh.
Ask the same to Tesla which has a 700B+ valuation, earlier over 1T. Like it or not, company valuations are about stories, not facts.
Tesla made $12.4B in profit last year. You can argue that the company is overvalued, sure, but there's no case to be made that it isn't a very viable and successful business. OpenAI meanwhile is banking on the fact that it will invent AGI soon and the AGI will figure out how to stop losing money on every query.
as a geniune user (not robot) i could not create an account with OpenAI even after solving their puzzles 100 times.
> The new fund-raising round, led by the investment firm Thrive Capital, values OpenAI at $157 billion, according to two people with knowledge of the deal. Microsoft, the chipmaker Nvidia, the tech conglomerate SoftBank, the United Arab Emirates investment firm MGX and others are also putting money into OpenAI.
Yeah, that bodes well. Led by Jared Kushner's brother's VC firm with the UAE's sovereign wealth fund and Softbank following. If not for Microsoft and NVIDIA, this would be the ultimate dumb money round.
Thrive is one of the 10 most respected firms in venture capital. They work super hard and have a track record to prove it. Nobody who knows what they’re talking about would consider them dumb money.
https://www.newcomer.co/p/sequoia-founders-fund-usv-elad-gil
Softbank is the one I'd worry about
Microsoft and NVIDIA are guaranteed an ROI since it comes right back as revenue for them.
Microsoft and (indirectly) Nvidia are the real destinations for a bunch of that money anyway, so I think your point stands.
Thrive Capital is one of the leading tech VC firms, with $16 billion under management. But I guess the name Kushner tickled your outrage neuron.
I'm wondering... if the rapid development of openai will actually have deflationary effect on the economy.
I wonder why Apple pulled out
Apple is an extremely conservative minded company. Making a huge gamble on an overhyped overvalued company for a chance at a 10x return isn't in their DNA.
I've been very disappointed in recent model releases, to be honest. It seems that o1 is their venture into reasoning, llms lack so much, but it's unclear if their approach does actually works towards robust reasoning. I do cheer for them and hope they can come up with something. Ai research is advancing too slowly!
If I were an investor, I'd be pretty concerned with such a high valuation after the o1 release. It's great, no question, but in my usage so far it's a modest step up from 4o, much smaller than the 3->4 jump. Real world exponential growth is exponential until it's logistic, and this sort of feels like entering that phase of the LLM paradigm.
Talking to friends who are very successful, knowledgeable AI researchers in industry and academia, their big takeaway from o1 is that the scaling hypothesis appears to be nearing its end, and that this is probably the motivation for trading additional training-time compute for additional inference-time compute.
So where does that leave an investor's calculus? Is there evidence OpenAI can pull another rabbit or two out of its hat and also translate that into a profitable business? Seems like a shaky bet right now.
They have evidence that inference time and inference time during training can continue to increase the reasoning abilities.
They do not actually need any further technology development to continue to add profitable products. There are numerous ways they can apply their existing models to offer services with various levels of specificity and target markets. Even better, their API offerings can be leveraged by an effectively infinite variety of other types of business, so they don't even need to do the application development themselves and can still profit from those companies using their API.
anecdotally, I'm flipping back and forth between o1 and GPT-4. o1 is mildly better at editing larger code segments. I worked with it to edit a large ~2k line python file in an unusual domain.
But o1 is also incredibly verbose. It'll respond with 1-2 pages of text which often contains redundant data. GPT-4o is better in it's descriptions.
Then you alone will not invest
Does OpenAI have a moat?
No.
The race is, can OpenAI innovate on product fast enough to get folks to switch their muscle memory workflows to something new?
It doesn't matter how good the model is, if folks aren't habituated to using it.
At the moment, my muscle memory to go to Claude, since it seems to do better at answering engineering questions.
The competition really is between FAANG and OpenAI, can OpenAI accumulate users faster than Apple, Google, Meta, etc layer in AI-based features onto their existing distribution surfaces.
Aside from vendor lock-in by making their integrations (APIs) as idiosyncratic and multifaceted as possible, I don’t think so.
As a layman outsider, it doesn't seem like it. Anthropic is doing great work (I personally prefer Claude) and now there are so many quality LLMs coming out that I don't know if OpenAI is particularly special anymore. They had a lead at first, but it feels like many others are catching up.
I could be _very_ wrong though.
They recently released a new model, called "o1-preview", that is significantly ahead of the competition in terms of mathematical reasoning.
Is it? There was some discussion on HN a while ago that it is better than gpt4o but nothing about the competition and that seems quite doubtful compared to e.g. alphaproof.
Also, if "significantly ahead" just means "a few months ahead" that does not justify the valuation.
On benchmarks where it’s impossible to verify whether there’s contamination?
> that is significantly ahead
Perhaps, but at most generous, it’s three months ahead of competitors I imagine
Hard to say in my opinion. I can say that I still use OpenAI heavily compared to the competition. It really depends though. I do believe they are still leaders in offering compelling apis and solutions.
It still has the first mover advantage, based on the revenue and usage graphs.
If somebody puts a cheaper and better version, then no moat.
It's called llama. And it's free.
Llama sucks man vs the best models sorry you cannot really be serious
I have only tried it with gpt4. Seems to be doing a pretty good job? What models should I try?
Eh, in the b2c play, sure- if they nail the enterprise maybe not.
It's the company that's most likely to be the first to develop superintelligence.
We heard for years that Uber was the company that's most likely to be the first to develop self-driving cars. Until they weren't. You can't just trust what the CEOs are hyping.
Based on… CEO proclamations?
Define super intelligence first maybe?
If superintelligence happens, then money won't matter anymore anyway.
I don't disagree, but what makes you say this?
In fact they do, it’s called servers, GPUs, scale. You need them to train new models and to serve them. They also have speed and in AI speed is a non traditional moat. They got crazy connections too because of Sam. All of that together becomes a moat that someone just can’t do a “Facebook clone” on OpenAI
OpenAI is dependent on Microsoft for GPUs, who are in turn dependent on Nvidia for GPUs. It’s nearly the least moat-y version of this out there.
Someone certainly can "Facebook clone" OpenAI. Google, Meta and Apple all are more well capitalized than OpenAI, operate at a larger scale and are actively training and publishing their own models.
I’m building several commercial projects with LLMs at the moment. 4o mini has been sufficient, and is also super cheap. I don’t need better reasoning at this point, I just need commodification, and so I’ll be using it for each product right up to the point that it gets cheaper to move up the hosting chain a little with Llama, at which point I won’t be giving any money to them.
They’ve built a great product, the price is good, but it’s entirely unclear to me that they’re continue to offer special sauce here compared to the competition.
It does. "ChatGPT", GPT, "OpenAI", etc... are strong brands associated with it.
Edit: You can downvote me all you want, I have plenty of karma to spare. This is OpenAI's strongest moat, whether people like it or not.
GPT is a generic tool name.
Those moats are pretty weak. People use Apple Idioticnaming or MS Copilot or Google whatever, which transparently use some interchangeable model in the background. Compared to chatgpt these might not be as smart, but have much easier access to OS level context.
In other words: Good luck defending this moat against OS manufacturers with dominant market shares.
>Those moats are pretty weak.
Name any other AI company with better brand awareness and that argument could make a little bit of sense.
Armchair analysts have been saying that since ChatGPT came out.
"Anyone could steal the market, anytime" and there's a trillion USD at play, yet no one has, why? Because that's a delusion.
What you are overlooking is the fact that AI today and especially AI in the future is going to be about integrations. Assisted document writing, image generation for creative work, etc etc. Very few people will look at the tiny gray text saying "Powered by ChatGPT" or "Powered by Claude"; name recognition is not as relevant as eg iPhone.
Anecdotally, I used to pay for ChatGPT. Now I run a nice local UI with Llama 3. They lost revenue from me.
Nobody cares, though, really. My experience is that clients are only passingly interested in what LLM powers the projects they need and entirely interested in the deployed cost and how well the end product works.
I for one can never get over the fact that Mira Murati was not laughed out of the room when she said -- with a straight face -- that GPT4 had high school level intelligence and the non-existent GPT5 will have PHD-level intelligence [1].
IMO -- this is not a serious company with serious people building an important long-lived product. This is a group of snake oil salesmen that are in the middle of the greatest grift of their careers. That, and some AI researchers that are probably enjoying limitless gpus.
[1] https://www.timesnownews.com/technology-science/next-gen-cha...
I currently can ask gpt4 to do a high school intelligence level task for me (financial data capture) so the issue?
> this is not a serious company with serious people building an important long-lived product. This is a group of snake oil salesmen
But that’s obviously not a fair description either, because they have the world-leading product in an intensely competitive field that does stuff nobody would have thought possible five years ago.
The marketing is obviously massive hyperbole bordering the ridiculous, but the idea that they haven’t produced something deeply serious and important is also ridiculous, to me.
The only (gigantic, huge, fatal—perhaps) problem they have at the moment is that their moat seems to only consist of a short head start over the competition.