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OpenAI in Talks for Funding Round Valuing It Above $100B
- colesantiago 2y agoSo what is the end game here? IPO on the stock market for over $500 billion or stay private like Stripe, SpaceX or Bytedance? Nobody can buy them without bankrupting themselves many times over, unless the big companies buy them (very unlikely) Or is OpenAI just going to keep raising and raising more and more? Is OpenAI even profitable?
- htrp 2y agoAllegedly yes (excluding all of the existing AI researcher costs).
- mechagodzilla 2y agoWait - they're 'profitable, excluding all of their employee costs'? Does that just mean they're charging more than the cost of their electricity to generate the tokens?
- mikeyouse 2y agoPresumably this would mean also earning more than the amortized cost of all the hardware they’ve purchased too which is a much higher bar than just electricity costs.
- edgyquant 2y agoIf they were why would they raise? They’ve already achieved scale.
- asadm 2y agothey need upfront $$ to fund GPT6 and beyond.
- blackoil 2y agoIPO is one option. Merger is another. Companies don't need to buy them in cash but in stocks.
- Bjorkbat 2y agohttps://www.theinformation.com/articles/why-openai-could-lose-5-billion-this-year https://www.theinformation.com/articles/why-openai-could-los... If you take this at face-value, they probably aren't profitable (to the tune of a $5 billion loss). I don't like idle speculation, but having actually read this their analysis seems pretty sound. Their numbers on training costs and hosting actually came from an anonymous insider. Impossible to say how reliable this anonymous insider is, but planting false, exaggerated numbers to outwit competitors seems a bit too much like a hare-brained scheme, hence why I opt to go with the numbers. If anything, companies tend to downplay costs when lying. The one thing that caught me as a little bit crazy was spending $1.5 billion on employees. They have ~1500 employees, so that's $1 million per head. That seems insane, but then again, AI researchers are a valuable commodity these days. Even if the cost of employees was $0, you'd still be looking at estimated losses in the billions.
- lijok 2y agoKind of a moot question. They’re not building rockets or payment rails.
- ilaksh 2y agoSometimes I think some companies are playing a different game. Where profit was never really a concern. The goal is just to keep showing growth and raising. You just have to cash out before the music stops or The Singularity happens. One aspect of The Singularity is the rapid acceleration into an unpredictable point of no return. Maybe the financial model mirrors this?
- quonn 2y ago> One aspect of The Singularity is the rapid acceleration into an unpredictable point of no return. One aspect of reality is that governments actually like to govern predictably and those with sufficient military power make sure they can.
- nwoli 2y agoRegulatory capture, monopoly prices when the earth is dependent on them and no new companies can form
- paxys 2y ago> Nobody can buy them without bankrupting themselves many times over, unless the big companies buy them (very unlikely) There are lots of M&A structures. A company can in fact buy another that is bigger than itself. Plus Microsoft will easily be able to afford a $100B acquisition with some creative financing, or maybe even outright cash.
- ThrowawayB7 2y agoHeaven forfend. It would be Nadella's equivalent of Ballmer's attempt to buy Yahoo.
- htrp 2y agoWould also explain all of the strawberry hype here https://news.ycombinator.com/item?id=41377329 https://news.ycombinator.com/item?id=41377329
- logicchains 2y agoI don't understand the market. By most metrics they don't even have the best LLM, Anthropic do, so why are investors valuing them so highly? Is it because of the strength of their brand?
- sfblah 2y agoWe've started using meta.ai and the 200B llama model on a couple servers we run at my company. I really have to go with Zuckerberg's approach on this one. I'm not sure OpenAI and Anthropic really have anything that can't be cloned much more cheaply.
- htrp 2y agoThere's a 200bn parameter llama model?
- sfblah 2y agoBleh you're right. I meant the 70B model. I think there's some other context where the number 200 makes sense. Thanks for the correction.
- jsheard 2y agoZuckerberg's approach may be good for you but it's costing Meta astronomical amounts of money for pretty nebulous benefit to themselves, so I wouldn't count on their current approach continuing forever. Enjoy it while it lasts.
- generalizations 2y agoMost of FAANG is effectively in competition with each other; OpenAI might be joining that cohort soon; as long as Facebook can kill their business model, Facebook is keeping a major player out of the running. Zuckerberg will keep doing this for as long as it takes to kneecap or bankrupt OpenAI.
- paxys 2y ago
- brcmthrowaway 2y agoAnyone feel like they missed the boat?
- Ericson2314 2y agoNope. I don't wanna do alchemy, even if it is more successful in applications than chemistry.
- lijok 2y agoThe boat isn’t even here yet. We’re watching it maybe getting built.
- asadm 2y agoyou miss 100% of the cars if you chase them on the street like a dog.
- paxys 2y agoIf AI is a bubble then the value is going to go down to ~$0. If AI is real then the value of OpenAI and related companies is going to go up into the trillions of dollars and join/replace all the current established tech players. Either way, there's plenty of time to join the fun.
- quonn 2y agoAnd why, exactly, would the other players not be able to simply do the same? Since all the important parts of the tech are widely understood and largely published?
- paxys 2y agoWhy has no one else been able to replicate Google, Apple, Facebook, Amazon, Salesforce, Oracle, IBM, Cisco, HP even though all of the tech is largely out there?
- quonn 2y agoBecause half of those have a real moat. Facebook has a strong network effect. Apple controls a platform and is deeply integrated between devices. There are cases to be made to a lesser degree for Amazon and Google and Salesforce. Oracle, IBM, Cisco and HP have all strong competitors and hardly a unique product.
- jppope 2y agoI feel like this is a good time to link that "no profit" skit from Silicon Valley (HBO show)?
- fragmede 2y agohttps://youtu.be/BzAdXyPYKQo https://youtu.be/BzAdXyPYKQo
- pnathan 2y agoAnthropic and other models are roughly par with OpenAI. I would value each of those companies' practical revenue potential as equal for now. The operating costs themselves are eye watering, and the hardware is deprecating. So that has to be subtracted from revenue projections to get something like a real valuation. I would invest in anthropic today, they seem to understand use cases better at the moment. I also think LLMs are wildly over hyped, and they will be shunted to a niche in the next few years, essentially providing autocomplete or search for business tasks for the most part, with strong inroads on video analysis, automated translation, and other classic machine learning & neural net tasks.
- fragmede 2y agoWhy would they go backwards in capabilities and get shunted to a niche instead of growing?
- junipertea 2y agoProbably as copyright lawsuits settle and they will have to pay for their training data
- fragmede 2y agothat would increase costs, not downgrade capabilities though
- Jensson 2y agoData holders often ban others from using their data and then create a competitor using it. See Netflix etc. So it is possible that capabilities go down instead of costs going up, simple because data holders would rather create their own service than sell their data.
- malfist 2y agoWhat's more likely is both. Capabilities go down because companies see their data as their moat, and costs go up as people price their data closer to the real value. See reddit
- bbqfog 2y agoDon't need them. Ever since Llama 3.1 came out I can control my data and not give it to OpenAI.
- nwoli 2y agoThis is kind of a HN dropbox comment. Very few non programmers would go through that
- bbqfog 2y agoThey won't have to because a thousand developers like me will offer them simple solutions. Facebook absolutely destroyed anyone's "moat" in this area.
- jgalt212 2y agoTrue, but enterprises wanting to make LLMs available to their non-technical employees would.
- deleted 2y ago[deleted]
- londons_explore 2y agoThing is, I don't think openAI has that dropbox mindset of 'do what the user wants and make it super easy' either. Sure, they have a great chat interface... But they have tech that can do so much more, and they aren't getting it directly into the hands of users... For example, where is "openAI translate"? Where is "openAI photo backup"? Where is "openAI phoneOS"? With a burn rate of $1B/month, they could hire tens of thousands of regular developers and rebuild a whole suite of AI powered tools.
- paxys 2y agoDo you host your own 405B parameter model?
- bbqfog 2y agoI've tried it on Lambda but it doesn't seem any better than 70B or even 8B for most tasks.
- cs702 2y ago"Above $100B" is > 30x annualized revenues reportedly in excess of $3B. The company is still unprofitable, reportedly burning around $1B every month. The risk for investors is vertigo-inducing high. The potential payoff is vertigo-inducing uncertain. Meanwhile, Meta is doing its darnedest to turn humongous SOTA models into commodities.
- api 2y agoI think the play for these companies was/is to erect regulatory barriers to entry by exploiting AI fear-mongering to regulate or outlaw open source or upstart competitors. That seems to be failing for the most part.
- nonethewiser 2y agoMeanwhile all the “safety” fears are really just reframing content moderation.
- JumpCrisscross 2y agoFor a growing company, the PEG ratio [1] is more appropriate than P/E. What it asks is how many years of sustained growth brings the P/E ratio in line with population. (As is customary in finance, it's inverted from its intuitive form.) OpenAI reportedly "doubled its annualized revenue to $3.4 billion in the past six months" to June from "$1.6 billion in late 2023" [2]. That implies a CAGR of 350% [a]. $100bn is a 29x revenue multiple to that ARR. S&P 500's average is 2.9x [3]. For OpenAI to match that multiple its sales would need to grow at 350% for 3 years. That would put OpenAI near the top 100 companies in America by sales [4]. Huge. But not unprecedented. [1] https://www.investopedia.com/terms/p/pegratio.asp https://www.investopedia.com/terms/p/pegratio.asp [2] https://www.theinformation.com/articles/openais-annualized-revenue-doubles-to-3-4-billion-since-late-2023?rc=gtdonx https://www.theinformation.com/articles/openais-annualized-r... [a] (3.4 / 1.6) ^ (1 / 0.5) - 1 [3] https://www.multpl.com/s-p-500-price-to-sales https://www.multpl.com/s-p-500-price-to-sales [4] https://en.wikipedia.org/wiki/List_of_largest_companies_in_the_United_States_by_revenue https://en.wikipedia.org/wiki/List_of_largest_companies_in_t...
- cherryteastain 2y agoAs a reference point, Intel's market cap is $83bn. Crazy if OpenAI pull it off.
- websap 2y agoYou're comparing a dinosaur to a caterpillar. OpenAI still has to bloom.
- Jensson 2y agoA butterfly still isn't much compared to a dinosaur.
- jessriedel 2y agoFwiw, OpenAI was already valued at $86B at the end of last year.
- FrustratedMonky 2y ago$100B. With Ilya Sutskever gone? With competitors catching up. It is the brains to make the next leap that is important.
- jgalt212 2y agoThey'll probably get it. Investors still have money to burn. And despite stocks making all time highs, the Fed is going to cut rates. Easing credit = even more money to burn.
- sk11001 2y ago> With Ilya Sutskever gone? By all accounts he wasn't the secret sauce, far from it, he was just around from the beginning.
- kernelsanderz 2y agohttps://archive.is/do6tG https://archive.is/do6tG