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Maybe but if you read the article OpenAI went from 1.6 billion to 3 billion in one year and is projected to be at $11 billion at the end of 2025. Commodities c

Maybe but if you read the article OpenAI went from 1.6 billion to 3 billion in one year and is projected to be at $11 billion at the end of 2025. Commodities can be massive businesses with competitive moats. Oil is a commodity BP and Exxon do just fine financially speaking.

criley2 2y ago
$11 billion revenue in 2025, but how much in costs? In 2024, they are projected to bring in $3.4 billion in revenue and lose $5 billion dollars. They just had a massive fundraising round for $6.6 billion which at the current costs and growth is what, 6-8 months of spend? If they bring in $11 billion in 2025, I expect them to lose at least $18 billion dollars. Good luck!
- patwolf 2y ago
  How will they continue to operate into the future with those kinds of losses? More rounds of funding? Loans? Charge more? Most companies with losses that big would be bankrupt, e.g. GM in 2009.
  - silver_silver 2y ago
    The true believers seem to think the compute and energy requirements will drop by an order of magnitude in the near future
    - jckahn 2y ago
      That didn’t go well for crypto.
      - gerikson 2y ago
        Crypto (at least proof-of-work) is purposefully designed to have rising per-unit production cost.
    - deleted 2y ago
      [deleted]
    - caeril 2y ago
      Inference is super cheap, and getting progressively cheaper. Greenlighting training a new foundation model is very expensive, but is also a human decision that can be postponed based on available capital.
- matwood 2y ago
  Why do you think cost would expand linearly with revenue? That's typically not how technology companies work. Compute gets cheaper over time and R&D expenses eventually cap out.
  - jazzyjackson 2y ago
    But OpenAIs R&D isnt going to level off until they reach AGI
  - criley2 2y ago
    We're in the "add billions in dollars of datacenters" and "spin up nuclear power plants" level of infrastructure needed for their growth, so if anything, I might be underestimating the costs if they grow as much as Sam claims they can. Didn't Sam ask TSMC to spend $7 trillion on new fabs? By comparison, $18 billion/yr spend seems very small.
- bryanlarsen 2y ago
  I imagine that OpenAI's operating revenue highly exceeds their operating costs. They spend virtually all their money on training and R&D salaries, not inference and operating salaries. There are three likely outcomes: 1. AI plateaus. OpenAI slashes the R&D budget to become profitable with revenue in double digit billions and profit in single digit billions. Valuation likely similar to today's. 2. AI doesn't plateau. OpenAI makes a killing. (Hopefully metaphorically, not literally) 3. Scenario 1 or 2, but it's a company other than OpenAI that wins.
  - throwaway314155 2y ago
    Bold of you to assume AI plateauing would be somehow intrinsically obvious to everyone, or even to the minds at OpenAI. Tunnel vision is common in tech, particularly when your salary (or funding) depends upon it.
  - tempusalaria 2y ago
    Don’t agree. Inference costs have been in a race to the bottom for a while and it’s likely imo that OpenAI is gross profit negative on inference right now
  - __loam 2y ago
    That's delusion, not imagination. Inference is far and away more expensive than R&D and training. It dominates the cost at these companies because it represents most of the unit economics. If OpenAI is not profitable, it's because each marginal customer costs more than they bring in. That's especially true for heavy users since OpenAI charges a fixed amount per customer per month. Couple that with a lack of pricing power thanks to all the other similar products in the market.
  - sottol 2y ago
    If AI were to plateau, OpenAI would be one of many providers without a clear edge, they'd lose market share. Companies might even start competing on price. Imo, it's not clear any of the software providers would really do that well in an "AI is commodity" scenario, HW companies might though. I'm running Phi3, Llama 3.2 and Mistral Nemo locally and they're decent enough for many things.
greg_V 2y ago
Oil is a special commodity in the sense that it's as important to civilization as water is to humans. It's also special in the other sense that we have geopolitical strife over who gets to extract it, sell it and to which market... I don't see how a chatbot meets any of those criteria
- ben_w 2y ago
  I'd also be surprised if it's like oil. But… > I don't see how a chatbot meets any of those criteria Calling these things "a chatbot" is likely limiting your vision: some of the stuff people build by fine-tuning LLMs, such as the ones OpenAI offer, use them to generate database queries matching their customers' database schemas. "Chatbot" is simply a convenient UI for an LLM in the same way that a web browser is a conventional UI for email. (And in this analogy, anyone calling an LLM "autocomplete on steroids" would be making the same mistake as someone saying "Wikipedia is just TCP on steroids"). I expect LLMs to continue to be extremely generic in the same way that web browsers are (market history shows periods where one browser dominates the market despite open source) or like spreadsheets (where Microsoft Office is, or was last I looked, dominant despite free offerings being good enough for most people). Society needs intelligence. We started using mechanical aids because it became impractical to perform census work by hand as the population increased, AI is a continuation of this process: we need it, it's a commodity, there may be a market opportunity despite free and/or open source competition, and (like Netscape, like Internet Explorer) there's no guarantee that the winner in one year will still be leading the next year or even existing a decade later.
discreteevent 2y ago
> Commodities can be massive businesses with competitive moats. Oil is a commodity BP and Exxon do just fine financially speaking. They invested in exploration and now they control those oilfields. They built refineries and have the systems and experienced people to operate them. Meta can't release a LLamaOilfieldAndRefinery which I can operate by just spending a few thousand on gpu's.

criley2 2y ago

$11 billion revenue in 2025, but how much in costs? In 2024, they are projected to bring in $3.4 billion in revenue and lose $5 billion dollars. They just had a massive fundraising round for $6.6 billion which at the current costs and growth is what, 6-8 months of spend? If they bring in $11 billion in 2025, I expect them to lose at least $18 billion dollars. Good luck!

patwolf 2y ago
How will they continue to operate into the future with those kinds of losses? More rounds of funding? Loans? Charge more? Most companies with losses that big would be bankrupt, e.g. GM in 2009.
- silver_silver 2y ago
  The true believers seem to think the compute and energy requirements will drop by an order of magnitude in the near future
  - jckahn 2y ago
    That didn’t go well for crypto.
    - gerikson 2y ago
      Crypto (at least proof-of-work) is purposefully designed to have rising per-unit production cost.
  - deleted 2y ago
    [deleted]
  - caeril 2y ago
    Inference is super cheap, and getting progressively cheaper. Greenlighting training a new foundation model is very expensive, but is also a human decision that can be postponed based on available capital.
matwood 2y ago
Why do you think cost would expand linearly with revenue? That's typically not how technology companies work. Compute gets cheaper over time and R&D expenses eventually cap out.
- jazzyjackson 2y ago
  But OpenAIs R&D isnt going to level off until they reach AGI
- criley2 2y ago
  We're in the "add billions in dollars of datacenters" and "spin up nuclear power plants" level of infrastructure needed for their growth, so if anything, I might be underestimating the costs if they grow as much as Sam claims they can. Didn't Sam ask TSMC to spend $7 trillion on new fabs? By comparison, $18 billion/yr spend seems very small.
bryanlarsen 2y ago
I imagine that OpenAI's operating revenue highly exceeds their operating costs. They spend virtually all their money on training and R&D salaries, not inference and operating salaries. There are three likely outcomes: 1. AI plateaus. OpenAI slashes the R&D budget to become profitable with revenue in double digit billions and profit in single digit billions. Valuation likely similar to today's. 2. AI doesn't plateau. OpenAI makes a killing. (Hopefully metaphorically, not literally) 3. Scenario 1 or 2, but it's a company other than OpenAI that wins.
- throwaway314155 2y ago
  Bold of you to assume AI plateauing would be somehow intrinsically obvious to everyone, or even to the minds at OpenAI. Tunnel vision is common in tech, particularly when your salary (or funding) depends upon it.
- tempusalaria 2y ago
  Don’t agree. Inference costs have been in a race to the bottom for a while and it’s likely imo that OpenAI is gross profit negative on inference right now
- __loam 2y ago
  That's delusion, not imagination. Inference is far and away more expensive than R&D and training. It dominates the cost at these companies because it represents most of the unit economics. If OpenAI is not profitable, it's because each marginal customer costs more than they bring in. That's especially true for heavy users since OpenAI charges a fixed amount per customer per month. Couple that with a lack of pricing power thanks to all the other similar products in the market.
- sottol 2y ago
  If AI were to plateau, OpenAI would be one of many providers without a clear edge, they'd lose market share. Companies might even start competing on price. Imo, it's not clear any of the software providers would really do that well in an "AI is commodity" scenario, HW companies might though. I'm running Phi3, Llama 3.2 and Mistral Nemo locally and they're decent enough for many things.

greg_V 2y ago

Oil is a special commodity in the sense that it's as important to civilization as water is to humans. It's also special in the other sense that we have geopolitical strife over who gets to extract it, sell it and to which market... I don't see how a chatbot meets any of those criteria

ben_w 2y ago
I'd also be surprised if it's like oil. But… > I don't see how a chatbot meets any of those criteria Calling these things "a chatbot" is likely limiting your vision: some of the stuff people build by fine-tuning LLMs, such as the ones OpenAI offer, use them to generate database queries matching their customers' database schemas. "Chatbot" is simply a convenient UI for an LLM in the same way that a web browser is a conventional UI for email. (And in this analogy, anyone calling an LLM "autocomplete on steroids" would be making the same mistake as someone saying "Wikipedia is just TCP on steroids"). I expect LLMs to continue to be extremely generic in the same way that web browsers are (market history shows periods where one browser dominates the market despite open source) or like spreadsheets (where Microsoft Office is, or was last I looked, dominant despite free offerings being good enough for most people). Society needs intelligence. We started using mechanical aids because it became impractical to perform census work by hand as the population increased, AI is a continuation of this process: we need it, it's a commodity, there may be a market opportunity despite free and/or open source competition, and (like Netscape, like Internet Explorer) there's no guarantee that the winner in one year will still be leading the next year or even existing a decade later.

discreteevent 2y ago

> Commodities can be massive businesses with competitive moats. Oil is a commodity BP and Exxon do just fine financially speaking. They invested in exploration and now they control those oilfields. They built refineries and have the systems and experienced people to operate them. Meta can't release a LLamaOilfieldAndRefinery which I can operate by just spending a few thousand on gpu's.