[HN Gopher] OpenAI completes deal that values company at $157B
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OpenAI completes deal that values company at $157B
Author : gmaster1440
Score : 127 points
Date : 2024-10-02 17:04 UTC (5 hours ago)
(HTM) web link (www.nytimes.com)
(TXT) w3m dump (www.nytimes.com)
| gmaster1440 wrote:
| Gift Link: https://www.nytimes.com/2024/10/02/technology/openai-
| valuati...
| lupire wrote:
| Does OpenAI have a moat?
| jjice wrote:
| 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.
| cubefox wrote:
| They recently released a new model, called "o1-preview", that
| is significantly ahead of the competition in terms of
| mathematical reasoning.
| Q6T46nT668w6i3m wrote:
| On benchmarks where it's impossible to verify whether
| there's contamination?
| diffeomorphism wrote:
| 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.
| petesergeant wrote:
| > that is significantly ahead
|
| Perhaps, but at most generous, it's three months ahead of
| competitors I imagine
| layoric wrote:
| Agreed. Sonnet 3.5 is still by far the most useful model I've
| found. o1-mini is priced similar and no where near as useful
| even if programming which it is suppose to excel. I recently
| tried o1-mini using `aider` and it would randomly start
| responding in russian mid way through despite all input being
| in english. If anything, I think Anthropic still has a decent
| lead when it comes to price to performance. Their update to
| Haiku and Opus will be very interesting.
| cubefox wrote:
| It's the company that's most likely to be the first to develop
| superintelligence.
| 0cf8612b2e1e wrote:
| Based on... CEO proclamations?
| awfulneutral wrote:
| If superintelligence happens, then money won't matter anymore
| anyway.
| snapcaster wrote:
| I don't disagree, but what makes you say this?
| hshshshsvsv wrote:
| Define super intelligence first maybe?
| changing1999 wrote:
| 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.
| infecto wrote:
| 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.
| returnInfinity wrote:
| 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.
| hshshshsvsv wrote:
| It's called llama. And it's free.
| m3kw9 wrote:
| Llama sucks man vs the best models sorry you cannot really
| be serious
| hshshshsvsv wrote:
| I have only tried it with gpt4. Seems to be doing a
| pretty good job? What models should I try?
| neom wrote:
| Eh, in the b2c play, sure- if they nail the enterprise maybe
| not.
| moralestapia wrote:
| 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.
| diffeomorphism wrote:
| 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.
| moralestapia wrote:
| >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.
| changing1999 wrote:
| 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.
| petesergeant wrote:
| 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.
| m3kw9 wrote:
| 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
| fach wrote:
| 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.
| m3kw9 wrote:
| Not anyone, it would be tough. You could also say the same
| that any one of these companies can do a Facebook clone,
| but it won't be easy
| petesergeant wrote:
| 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.
| danpalmer wrote:
| 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.
| m3kw9 wrote:
| Used to be when they had no money
| brotchie wrote:
| 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.
| layer8 wrote:
| Aside from vendor lock-in by making their integrations (APIs)
| as idiosyncratic and multifaceted as possible, I don't think
| so.
| cs702 wrote:
| 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!_
| alex_young wrote:
| 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.
| cs702 wrote:
| My understanding is that the company is burning $0.5+ to $1+
| billion each month.
|
| I'd say that's very high risk.
| lumost wrote:
| That is also much lower than Uber at its peak.
| smt88 wrote:
| Uber was a literally life-changing product with an
| obvious value for anyone. LLMs have neither benefit.
| choilive wrote:
| 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.
| paxys wrote:
| 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.
| moralestapia wrote:
| 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.
| Yizahi wrote:
| 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.
| yumraj wrote:
| 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.
| tux3 wrote:
| 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.
| senko wrote:
| At their stage and size, it's probably 3x-5x. Still sky high!
| Workaccount2 wrote:
| >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.
| cs702 wrote:
| 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...
| mcast wrote:
| 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.
| Workaccount2 wrote:
| 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.
| mattmaroon wrote:
| I think he's even past robo taxi and onto AI and robots
| that build robots that build robotaxis. I wish I were
| joking.
| aswanson wrote:
| What's dogecoins valuation? Cardanos? Bitcoins? There is a
| nigh-infinite amount of capital ready to get entranced by a
| sexy story.
| smt88 wrote:
| The Nissan Leaf was far more affordable than a Tesla 10
| years ago and very practical for anyone living in a city.
| changing1999 wrote:
| 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.
| bryanlarsen wrote:
| 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.
| changing1999 wrote:
| 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.
| foobarqux wrote:
| 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.
| m3kw9 wrote:
| 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
| tqi wrote:
| 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.
| mattmaroon wrote:
| 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.
| jsheard wrote:
| 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?
| baq wrote:
| Honestly, it isn't a bad plan at all.
|
| Assuming money even makes sense in a world with AGI, that is.
| 0cf8612b2e1e wrote:
| 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.
| baq wrote:
| 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.
| philipkglass wrote:
| 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.
| 0cf8612b2e1e wrote:
| 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
|
| Fanciful, yes, but that is the AI fantasy.
| austhrow743 wrote:
| America not using its nuclear advantage to secure its
| nuclear advantage doesn't mean it couldn't have.
| hn_throwaway_99 wrote:
| 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.
| benterix wrote:
| 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.
| xvector wrote:
| 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.)
| flunhat wrote:
| > 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!)
| xvector wrote:
| 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-...
| yunwal wrote:
| 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.
| xvector wrote:
| > 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
| BarryMilo wrote:
| Would you settle for a few days of testing in perfect
| conditions? Just kidding, companies don't care!
| beAbU wrote:
| /All Gifts, Bestowed/ by Gayou is a great read that
| explores this topic.
| throwup238 wrote:
| 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.
| baq wrote:
| 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.
| visarga wrote:
| I think there won't be just one AGI, no central planner.
| LLM abilities leak, other models can catch up in a few
| months.
| jiggawatts wrote:
| The problem with all such criticisms is that there is an
| implicit assumption that humans can be trusted.
| stoperaticless wrote:
| 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.
| jiggawatts wrote:
| Have you... met humans?
| brendoelfrendo wrote:
| 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.
| shermantanktop wrote:
| 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.
| nonameiguess wrote:
| 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.
| s1artibartfast wrote:
| 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.
| giarc wrote:
| How old is that though? They seem to be making revenue pretty
| well now, so I suspect this might be quite old?
| lxgr wrote:
| 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.
| Retric wrote:
| 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.
| lxgr wrote:
| The potential user base seems quite finite to me, even
| under most optimistic assumptions.
| JamesBarney wrote:
| > 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.
| lxgr wrote:
| 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.
| baq wrote:
| If everyone is building datacenters, sell nuclear reactors.
| mirekrusin wrote:
| Billion dollars isn't cool, you know what is? A trillion
| dollars.
| danielmarkbruce wrote:
| 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.
| s1artibartfast wrote:
| 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.
| doctorpangloss wrote:
| Another POV is that, how many new household names familiar to
| adults can you think of? Since 2015? Basically TikTok and
| ChatGPT. If you include kids you get Fortnite, Snapchat and
| Roblox. Do you see why this is such a big deal?
| mattmaroon wrote:
| 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.
| changing1999 wrote:
| 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.
| layer8 wrote:
| 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.
| adastra22 wrote:
| They accomplished AGI (artificial general intelligence) years
| ago. What do you think ChatGPT is?
|
| Alternatively, what are you imagining this "AGI" you speak of
| to be?
| adabyron wrote:
| 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.
| cs702 wrote:
| My understanding is that Microsoft has already earned a large
| return, from incremental Azure revenues.
| jesseab wrote:
| Investors probably aren't expecting a 10x return on a late
| stage investment like this.
| adastra22 wrote:
| The 10x return is on the investment amount, not the total
| valuation. And is a rule of thumb for early stage companies,
| not late rounds like this.
| janandonly wrote:
| ChatGPT is valued $157BN?
|
| What discount rate do you use on a cash burning non-profit?
| fullstackchris wrote:
| Ask the same to Tesla which has a 700B+ valuation, earlier over
| 1T. Like it or not, company valuations are about stories, not
| facts.
| paxys wrote:
| 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.
| smlacy wrote:
| negative times a negative is a positive
| shermantanktop wrote:
| It's just math, duh.
| artninja1988 wrote:
| 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!
| throwup238 wrote:
| _> 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.
| jddj wrote:
| Microsoft and (indirectly) Nvidia are the real destinations for
| a bunch of that money anyway, so I think your point stands.
| ralph84 wrote:
| Microsoft and NVIDIA are guaranteed an ROI since it comes right
| back as revenue for them.
| blackhawkC17 wrote:
| 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.
| asukumar wrote:
| 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
| KoolKat23 wrote:
| Softbank is the one I'd worry about
| heyitsguay wrote:
| 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.
| m3kw9 wrote:
| Then you alone will not invest
| ilaksh wrote:
| 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.
| lumost wrote:
| 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.
| Someone1234 wrote:
| 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.
| jsheard wrote:
| > 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:
|
| https://news.ycombinator.com/item?id=41658837
| lynx23 wrote:
| "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.
| canada_dry wrote:
| > 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.
| shermantanktop wrote:
| Or an answer that left out the fact that Pepperidge Farm
| remembers, Coke is life, and yo queiro Taco Bell.
| bearjaws wrote:
| > before the enshittification begins.
|
| It already happens, when your model randomly gets worse all of
| a sudden for the same price of service.
| teqsun wrote:
| After Theranos and WeWork, I'm always skeptical of any Pre-IPO
| "valuations".
| kredd wrote:
| 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.
| _1 wrote:
| Have any of those become profitable?
| kredd wrote:
| 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.
| plorkyeran wrote:
| 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.
| paxys wrote:
| Yes, all of them are profitable.
| padjo wrote:
| Uber made a 1.1 billion profit last year.
| romanhn wrote:
| Airbnb is down 10% since going public. Coinbase is down over
| 50%. I think some skepticism around pre-IPO valuation is
| warranted.
| deisteve wrote:
| $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
| qeternity wrote:
| 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?
| NickNaraghi wrote:
| > 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
| adastra22 wrote:
| Who would pay 2k/mo? For what?
|
| That's someone's rent.
| ToValueFunfetti wrote:
| 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...
| KoolKat23 wrote:
| 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.
| ToValueFunfetti wrote:
| Right, so
|
| 300m $/mo. * 12 mo. * x - costs = 7.85b
|
| or
|
| $3.6b * x = 7.85b + costs
|
| I hold costs constant at $8B and get x = 4.4. $8B is
| probably a slight overestimate of current costs, I just
| took the losses from the article and discounted the last
| year's revenue to $3B. Users use inference which costs
| money so, in reality, costs will scale up with revenue,
| which is why I note this is a false assumption. But I also
| don't know how much of that went into training and whether
| they'll keep training at the current rate, so I can't get
| to a better guess.
| pcurve wrote:
| I'm wondering... if the rapid development of openai will actually
| have deflationary effect on the economy.
| Rebuff5007 wrote:
| 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...
| petesergeant wrote:
| > 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.
| KoolKat23 wrote:
| I currently can ask gpt4 to do a high school intelligence level
| task for me (financial data capture) so the issue?
| CSMastermind wrote:
| I wonder why Apple pulled out
| paxys wrote:
| 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.
| dom96 wrote:
| or after building their own LLM that runs locally on Apple
| Sillicon they've decided that this technology is crazily
| overhyped
| CSMastermind wrote:
| But why wait until the 11th hour to pull out?
|
| They were on the round up until today.
| paxys wrote:
| $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.
| nwiswell wrote:
| > 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).
| bpodgursky wrote:
| 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.
| seanhunter wrote:
| 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.
| bpodgursky wrote:
| 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.
| tboyd47 wrote:
| 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)
| tptacek wrote:
| 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.
| azinman2 wrote:
| 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.
| tptacek wrote:
| Facebook got all the way to an IPO with business
| fundamentals so bad that after the IPO, Paul Graham wrote
| a letter to all the then-current YC companies warning
| them that the Facebook stink was going to foul the whole
| VC market in the following years. Meta is now worth
| something like 1.4T.
| yifanl wrote:
| Facebook made it out by committing click fraud against
| advertisers on a massive scale, which I don't see as a
| viable path for sama (even ignoring any legal concerns)
| considering that openAI isn't a platform company.
| tptacek wrote:
| Look, I don't care. At some point we're just arguing
| about the validity of big tech investing. I don't invest
| money in tech companies. I don't have a strong opinion
| about Facebook, or, for that matter, about OpenAI. I'm
| just saying, you don't need a sci-fi story about AGI to
| see why people would plow this much money into them.
| That's all.
| nitwit005 wrote:
| You're kind of selling investing in Google instead, given
| that they're one of OpenAI's competitors.
| tptacek wrote:
| If you think Google wins and crushes them, sure.
| itsoktocry wrote:
| > _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.
| talldayo wrote:
| > 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.
| semanticist wrote:
| 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".
| lukev wrote:
| Model training is what costs so much. I would expect OpenAI
| makes a profit on inference services.
| rightbyte wrote:
| 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?
| dartos wrote:
| 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.
| paxys wrote:
| > 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.
| signatoremo wrote:
| > 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.
| fakedang wrote:
| Thing is, when I go onto Google, I know I'm using Google.
| When my employees use the internal functions chatbot at
| my company (we're small but it's an enterprise use case),
| they don't know whether it's OpenAI or Claude under the
| hood. Nor do they care honestly.
| s1artibartfast wrote:
| I seems like not ending 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.
| zeusk wrote:
| > 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.
| bionhoward wrote:
| the default answer is to love ChatGPT but be unable to use it
| because of the prohibition on competition. Who wants to chat
| with something that learns to imitate you and you can't learn
| to imitate it back? Seems like everyone using ChatGPT is
| sleepwalking into economic devastation...
|
| also, for my use case I eventually found it's faster and
| easier and less frustrating to write code myself (empowering)
| and not get sucked into repeatedly reminding AI of my intent
| and asking it to fix bugs and divergences (disempowering)
|
| Plus, you can find alternatives now for the random edge cases
| where you do actually want to chat with an out of date
| version of the docs, which don't train on user input.
|
| I recommend we all "hard pass" on OpenAI, Anthropic, Google,
| basically anyone who's got prohibitions on competition while
| simultaneously training their competing intelligence on your
| input. Eventually these things are going to wreck our
| knowledge work economy and it seems like a form of economic
| self-harm to knowingly contribute to outsource our knowledge
| work to externals...
| TZubiri wrote:
| Same thing was said of Netflix, of Uber, etc...
|
| Venture capital loses money to win marketshare, tale as old as
| time
| seper8 wrote:
| 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.
| wslh wrote:
| I think the simplified question is if OpenAI is a natural
| monopoly like Google was/is or if that market has a
| different structure like an oligopoly (e.g. mobile phone
| market), "perfect" market, etc. On the technological side
| it seems obvious (does it?) that we can run good models
| ourselves or in the cloud. What is less clear if there will
| be a few brands that will offer you a great UX/UI, and the
| last mile wins.
| rightbyte wrote:
| Neither had Zuckerberg giving free hikes and movies to
| people.
| hintymad wrote:
| 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.
| azinman2 wrote:
| 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.
| hintymad wrote:
| I assumed that Microsoft gave them discount and credits as
| investment, but the cost by itself is like any other big
| customer can get.
| azinman2 wrote:
| Of course the cost isn't near zero, but is the pricing
| "at Microsoft's 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.
| hintymad wrote:
| Good point. I updated the assumption accordingly. I
| assume the cost of using Azure cloud after discount but
| before the credit will be on par with Azure's big
| customers. And given the scale of OAI, I suspect that the
| only way to be profitable is to have their own infra.
| adastra22 wrote:
| The cost of vertically integrated inference isn't zero
| either.
| lesuorac wrote:
| Wouldn't it be foolish for microsoft to give them a
| discount?
|
| Like you could discount say a 10B investment down to 6B
| or w/e the actual costs are but now your share of OpenAI
| is based on 6B. Seems better to me to give OpenAI a "10B"
| investment that internally only costs 6B so your share of
| OpenAI is based on 10B.
|
| Plus OpenAI probably likes the 10B investment more as it
| raises their market cap.
| the_real_cher wrote:
| Are there enough gpus available at the scale that they need
| them?
| gm3dmo wrote:
| Building datacenters will take a significant amount of time.
| if they don't have locations secured then even more so.
| slashdave wrote:
| I cannot believe they don't already get steep discounts via
| custom contracts with providers.
|
| Someone has to pay for the hardware and electricity.
| paxys wrote:
| As part of Microsoft's last investment in 2023 OpenAI agreed
| to exclusively use Azure for all their computing needs. I'm
| not sure what the time limit on that agreement is, but at
| least for now OpenAI cannot build their own datacenters even
| if they wanted to.
| ynabil wrote:
| 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.
| gsky wrote:
| as a geniune user (not robot) i could not create an account with
| OpenAI even after solving their puzzles 100 times.
| threwaway4392 wrote:
| 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.
| seper8 wrote:
| Difference is is that I can just switch to another LLM.
|
| I cant really do the same for Google.
| nicce wrote:
| I haven't used Google for year, and I find better results
| than ever.
| adastra22 wrote:
| There are other search engines...
|
| I haven't used google in years.
| babelfish wrote:
| Why not? For Google Search specifically, there is no lock-in
| (obviously yhe productivity suite has more)
| alanlammiman wrote:
| 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.
| jppope wrote:
| Can't help but think about this scene from silicon valley:
| https://www.youtube.com/watch?v=BzAdXyPYKQo
|
| The "no revenue" scene... All OpenAI needs to do is start making
| some revenue to offset the costs!
| paul7986 wrote:
| In April they hyped up being able to talk to something like a
| H.E.R. Yet it seems all hype and not a reality. They say sign up
| and u might get access lol ... startup for speak give us ur money
| but we don't have the product we advertised/hyped up! Won't give
| them anymore of my money!
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