> OpenAI’s business model, as it exists today, doesn’t really inspire confidence, as it seems to exist on the promise of ‘jam tomorrow.’ Specifically, the firm has an income of approximately $3 billion per year, which is put in deep shade by its $7 billion annual expenditure.
So a yearly loss of 4 billion dollars or losing $10 million daily. The IPOs basically (mostly) have been operating just the way Bitcoin has been - Next bigger fool theory. That you pass on the potato to the next bigger fool till it ends to the last in the chain like Twitter who doesn't know what to do to churn out those inflated sums paid along the chain.
Not sure how many days OpenAI can afford to lose 10 million dollars daily but current macroeconomic environment, prospects aren't great.
Most of the expense can probably be attributed to training and operating their free-tier. They can shut off both of them any day and become insanely profitable. I don't think people realize the sheer magnitude of reaching $3B ARR in under two years. Is there an AI hype? Sure. Is it a crypto-like bubble just where everyone is just peddling BS? No, not even close.
> I don't think people realize the sheer magnitude of reaching $3B ARR in under two years.
These things impress people who fail to digest business fundamentals. Anyone with a suit and a slick powerpoint preso can in theory start a money-incinerating machine. The real measurement is the profit. And before someone makes the "capture the market" comment - this isn't ZIRP anymore. Money costs fuckin money now.
Amazon was not profitable for many years, yet they are one of the most valuable companies in the world.
Why? Because they kept growing.
What OpenAI is doing is "sustainable" if they keep growing like that.
From summer 2023 to summer 2024 they 6x their revenue to 3.4B USD.
If they 4x next year and 3x the year after, they would make 40B in revenue.
That's a common misconception: They reinvested their money back into Amazon, which when justified with a sound strategy to investors makes sense. It was kept by design at an almost 0 profit, but non profitable != operating at a loss (vs OAI, that has been predicted to loss up to 5B this year).
So a yearly loss of 4 billion dollars or losing $10 million daily. The IPOs basically (mostly) have been operating just the way Bitcoin has been - Next bigger fool theory. That you pass on the potato to the next bigger fool till it ends to the last in the chain like Twitter who doesn't know what to do to churn out those inflated sums paid along the chain.
Not sure how many days OpenAI can afford to lose 10 million dollars daily but current macroeconomic environment, prospects aren't great.