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Given their current product offerings, I really don't see a way they could ever justify a $300B valuation unless they get everyone on the planet to subscribe to

Given their current product offerings, I really don't see a way they could ever justify a $300B valuation unless they get everyone on the planet to subscribe to their $200/month plan. I'm calling it now: investors are gonna get burned hard on this one. Cause right now all they have is "well we are working on superintelligence" and to that I say "great, then what?". Even if they do make that breakthrough I don't see how that will equate to that kind of valuation, especially considering that Anthropic and Google are both hot on their heels.

mgfist 1y ago
> OpenAI’s business continues to surge. DealBook hears that the company’s annual recurring revenue has soared to $13 billion, up from $10 billion in June — and is projected to surpass $20 billion by the end of the year. This is why. Of course $300B still implies a lot of growth, but when you're growing 100% in 6 months at $10B in ARR, you can demand a lot.
- indigodaddy 1y ago
  And what's the profit on the 13B?
  - mgfist 1y ago
    Irrelevant at this stage.
    - KerrAvon 1y ago
      the problem with the post-dotcom market in a nutshell. everything’s a bubble. bubbles have more durability now. until they don’t.
      - mgfist 1y ago
        Sure, but this mentality always would result in missing out on the trillion dollar companies that followed these types of growth curves. Surely you must understand that prioritizing growth over profit makes economic sense in the long run for a company like OpenAI.
        Barrin92 1y ago
        >prioritizing growth over profit makes economic sense in the long run only if you have a believable plan on how to reverse that, selling 2 dollars for 1 dollar isn't a business model and no amount of praying for the future is going to change that
        ath3nd 1y ago
        Mathematics don't matter. It's about what your guru of choice on X tells you to believe in.
        mgfist 1y ago
        People have said the same about all the big tech companies and now they all print cash and are worth trillions. Will it happen? Who knows. If investing was easy to predict we'd all be very rich ..
    - ath3nd 1y ago
      I like how you are thinking. When hype is involved, why should one bother with facts, timelines and reality. Great, stable and successful companies like Enron, Wirecard, Theranos, FTX and WeWork are prime examples of that. Note: I am not saying OpenAI is a fraud like the above, just saying that their valuation is as divorced from reality as Zuck's "Superintelligence is behind the corner" comment last week. Their models are not largely better than other competitors', they haven't cornered the market, they are burning through money with no profitability in sight, Anthropic just cut their access to Claude (not relevant, just funny). Come on, their most recent product announcements were: - an office suite: https://www.computerworld.com/article/4021949/openai-goes-for-microsofts-jugular-its-office-productivity-suite.html https://www.computerworld.com/article/4021949/openai-goes-fo.... - a restricted, less powerful (hide-the-spoilers) version called "Study Mode": https://openai.com/index/chatgpt-study-mode/ https://openai.com/index/chatgpt-study-mode/ It's just...there is nothing going on for them at the moment. The valuation is just wishful thinking, if we are looking at the facts. We live in a crazy world, all one can do is buy some popcorn and enjoy the shitshow.
- pphysch 1y ago
  Enron was also "growing" a lot when it was in full "paper tiger" mode.
  - mgfist 1y ago
    Ok, and? Last I heard were talking about OpenAI, not Enron.
    - ath3nd 1y ago
      Surely you can spot the similarities if you try hard enough? If not, maybe we can ask ChatGPT about it (below is ChatGPT's "opinion" on the similarities between Enron and OpenAI): Structural Complexity & Opacity: - Enron was infamous for its convoluted corporate structure, which helped obscure financial realities. - OpenAI has a similarly complex setup: originally founded as a nonprofit, it now operates through a for-profit arm with a structure that some critics say lacks transparency. Investor Hype vs. Financial Fundamentals: - Enron attracted massive investment based on future projections, not present performance. Its ventures, like NewPower Co., had no clients or revenue but were valued in the billions. - OpenAI has been valued at over $300 billion despite not turning a profit and having no clear path to profitability. Critics argue this is reminiscent of Enron’s “vibes-based” valuation. Leadership & Ethical Concerns - Enron’s leadership was later revealed to have serious ethical lapses. - OpenAI has faced scrutiny over leadership turnover and internal conflicts, raising questions about governance and long-term stability. Grandiose Predictions: - Both companies have been known for bold, sweeping claims about the future. Enron promised revolutionary energy solutions; OpenAI is at the forefront of AI’s transformative potential—but some worry the hype may be outpacing reality Hope that helps :)
      - mgfist 1y ago
        I like how you clearly used AI to create this comparison. Probably used ChatGPT for it
        ath3nd 1y ago
        > I like how you clearly used AI to create this comparison. Probably used ChatGPT for it Great catch! You should consider a career as a detective! I hope this sentence from the beginning of my post didn't make it too easy on your impressive deduction skills: "If not, maybe we can ask ChatGPT about it (below is ChatGPT's "opinion" on the similarities between Enron and OpenAI):"
boringg 1y ago
There is A LOT of optionality to get different revenue streams that aren't strictly retail buying subs. Whether they are able to do that, customer stickiness and the trade off of damage to the quality of their product by driving revenue remain the largest long term questions in my mind (outside of the viability of super intelligence).
scottyah 1y ago
They're going to sell glasses with cameras that analyze your life to better assist your AI in product placement. Set gentle reminders that three of your friends have the new fall color line Stanley Cups, and remind you to get one before your nemesis does.
disgruntledphd2 1y ago
They're currently "worth" 3.2 Stripes, which seems pretty absurd to me. (I'm now using 1 Stripe as a metric to measure the valuation of AI companies).
- beering 1y ago
  Do you think that is absurd because OpenAI is overvalued? Or because Stripe is overvalued? Or one of them is undervalued?
  - disgruntledphd2 1y ago
    My personal belief is that one of the valuations is wrong. Stripe are absurdly large and them disappearing would be a big deal. I think the AI companies disappearing would have a lot less impact.
svantana 1y ago
> get everyone on the planet to subscribe to their $200/month plan Not necessarily. Google is valued 7x that and most people don't pay them anything. They just make ridiculous money from ads for insurance and loans. Meanwhile, ChatGPT is the #1 app and the #5 website, which should really worry google (and it does by all accounts).
- peab 1y ago
  yeah, it's pretty easy to see how openai could steal those high paying queries from Google, if they continue growing at this rate.
  - grues-dinner 1y ago
    I assume the plan is getting AI into everything and making millions of data centipedes that eventually lead back to their APIs. Then embed ads.
- alfalfasprout 1y ago
  Yes, and they have a monopoly on the ad market. Whereas a SOTA LLM can be used to bootstrap an almost-as-good LLM. The gap is shrinking between SOTA models and there's now fierce competition. Moreover, ads are a very high ROI business. The profit margins on SOTA LLM offerings are razor thin or negative.
  - svantana 1y ago
    > they have a monopoly on the ad market Only if you look narrowly at search ads, but really they compete with Meta, Tiktok and X for ad spend. And the quality of the LLMs is beside the point, just like search engine quality. ChatGPT has a near monopoly on 'AI' mindshare, with the general public.
    - vasco 1y ago
      What they mean is there's no moat in a SOTA model.
an0malous 1y ago
They’re going to sell to the military, that’s why they hired the former NSA director into their board. The current state of AI is a perfect mass surveillance technology.
- delusional 1y ago
  > The current state of AI is a perfect mass surveillance technology. How? Are you just going to ask the LLM about who is doing the crime? OpenAI is not an "AI company", it's an "LLM company".
  - rwmj 1y ago
    You do what they're already doing - ask the LLM to summarise someone's entire facebook feed (including all the private stuff they can access) into a few bullet points. Whether it works reliably is a different matter.
  - an0malous 1y ago
    You ask it to do the things that human analysts already currently do with the vast amounts of text, image, and video data they collect but at an unprecedented scale. You can extract what people are talking about, identify people, weapons, or objects in images, extract addresses, license plate numbers, or other identifying references. It can probably even detect when people are using coded language that won’t trigger explicit keywords. OpenAI is an AI company, it’s literally in the name. Even currently they use more than LLMs, they use other transformers and related technology in the field of AI.
    - topato 1y ago
      There's also the option of running sentiment analysis on social media posts, easily allowing placing individuals on a left-to-right scale of political leaning.
    - adriand 1y ago
      Yes, you can do all those things, and critically, if the bottom falls out of the market, you can make that case to the US government, complete with a fear-based narrative (China!) and get bailed out by the American taxpayer.
vessenes 1y ago
Startup-land valuations are for PR. The real negotiation is in the discount and the cap, warrants, etc. That $8.3b came in early, and was oversubscribed, so the terms are likely favorable to oAI, but if an investor puts in $1b at a $300b valuation (cap) with a 20% discount to the next round, and the company raises another round at $30b in two months; good news: they got in at a $24b price. To your point on Anthropic and Google; yep. But, if you think one of these guys will win (and I think you have to put META on this list too), then por que no los quatro? Just buy all four. I'll call it now; they won't lose money on those checks.
- itkovian_ 1y ago
  I’m gonna go ahead and guess they didn’t raise 8.3b on SAFEs
MangoCoffee 1y ago
>I'm calling it now: investors are gonna get burned hard on this one. I'm in my late 40s. I'm Gen X. I lived through the glory days of the dotcom boom, when investors got burned for tons of money. But from the ashes of those bullshit companies, we got Amazon, Google, etc., which made investors rich beyond belief. SoftBank’s Masayoshi Son made a bet on Alibaba ($20 million, its stake now worth $72 billion), and he’s been living off that wealth ever since. I haven’t seen him make any good bets lately. investors don’t really care if 100 of the shit they throw don’t stick because all they need is just one.
- zozbot234 1y ago
  Amazon is technically a dotcom company. (I.e. it was around, and quite successful, during the dotcom era.)
  - pera 1y ago
    Yeah by 2001 Amazon was already cash flow positive.
- ac29 1y ago
  > I'm in my late 40s. I'm Gen X. I lived through the glory days of the dotcom boom, when investors got burned for tons of money. But from the ashes of those bullshit companies, we got Amazon, Google, etc., which made investors rich beyond belief. True, but I think they were talking specifically about the direct investors in OpenAI. "Investors" writ large will likely continue to have good long term returns (with occasionally significant short term volatility).
- IshKebab 1y ago
  I think he made a good profit on ARM, and probably most people wouldn't have called that. More than enough to cancel out WeWork. But looking at their overall value over 5 years... it's pretty random; you could have done just as well investing in index funds. He clearly got super lucky with Alibaba and once you're mega rich it's not hard to stay mega rich.
- skinnymuch 1y ago
lelanthran 1y ago
Firstly, the $200/m plan is at a loss, they'll make a profit on PAYG tokens, not plans. Secondly, this is looking very risky: they are at the bottom of the value chain and eventually they'll be running on razor thin margins like all actors who are at the bottom of the value chain. Anything they can offer is doable by their competitors (in Google's case, they can even do it cheaper due to ow ing the vertical which OpenAI doesn't own). Their position in the value chain means they are in a precarious spot: any killer app for AI that comes along will be owned by a customer of OpenAI, and if OpenAI attempts to skim that value for itself that customer will simply switch to a new provider of which there are many, including, eventually, the customer themselves should they decide to self host. Being an AI provider right now is a very risky proposition because any attempt to capture value can be immediate met with "we're switching to a competitor" or even the nuclear "fine, we'll self host an open model ourselves". We'll know more only when we see what the killer app is, when it eventually comes.
- deleted 1y ago
  [deleted]
- notfromhere 1y ago
  Maybe the better analogy for LLM businesses isn’t SaaS but more like power generation. If AI really becomes that ubiquitous then OpenAI capturing that value is no less ridiculous than ComEd capturing the value of every application of electric power.
  - zozbot234 1y ago
    What OpenAI has is the know-how in developing new models and training them efficiently. That's a kind of value they can provide even in a world where open-sourced local models are in common use.
    - notfromhere 1y ago
      Sure but so do like a dozen other companies. Given that models bump past each other every few months, I haven’t seen anything that says they have any kind of competitive advatange.
skeptrune 1y ago
What are you talking about? All they have to do is sell ads at this point
- antonvs 1y ago
  As a large language model, I cannot help you with your request, but have you heard about the latest Starbucks Summer Frapulaccini?
alephnerd 1y ago
> I really don't see a way they could ever justify a $300B valuation Their ARR is around $13B. A 23x multiple is acceptable when compared against peers with a similar ARR. > unless they get everyone on the planet to subscribe to their $200/month plan I used to be a sceptic as well, but OpenAI successfully built their enterprise GTM. A number of corporate AI/ML apps are using OpenAI's paid APIs in the background.
philjohn 1y ago
> unless they get everyone on the planet to subscribe to their $200/month plan. that would be a monthly recurring revenue of 200 x 7bn = $1,400,000,000,000 or $1.4tn a month, $16.8tn per year! I think they've be valued a bit higher than $300bn if that were the case.
- sapphicsnail 1y ago
  I think it was hyperbole
  - fragmede 1y ago
    Obviously. But if you look at the math, 20 million people paying $200/month justifies a $300b valuation for a saas business, so saying $300b isn't justified because it's a big number is lazy thinking.
    - kevingadd 1y ago
      Isn't that $4b in raw revenue per month, or $48b/year? That's not even considering the expenses to operate the service and deliver the $200/mo product. I don't see how that automatically equates to a $300b valuation. A high valuation, to be sure, but... I'm still very curious whether OpenAI is turning a profit on any of their services.
impossiblefork 1y ago
It also seems that Google might be slightly ahead, since they claim to have released something in the style of their IMO-winning model and have the claim that it's useful to professional mathematicians. I haven't tried it yet though.
riku_iki 1y ago
> Given their current product offerings, I really don't see a way they could ever justify a $300B valuation unless they get everyone on the planet to subscribe to their $200/month plan. the strongest opportunity is to compete with google on search queries, and make money from ads (200B annual revenue)
deleted 1y ago
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svara 1y ago
> Cause right now all they have is "well we are working on superintelligence" and to that I say "great, then what? Then you ask your superintelligence for advice on how to make money, obviously.
deadbabe 1y ago
Instead of everyone on the planet, how about 800 million people paying $2k/month?
- epolanski 1y ago
  I don't think the planet has 800M people making 2k/month. You would be surprised but 2000$ / month is top 5% salary in the world more or less, so it's less than 200M people in the world. In Italy, an advanced economy, that's above the median. It's also above what half the Japanese population makes.
toephu2 1y ago
Also, how would they go public? Do to their legal structure, has it been determined how they can IPO?
fisherjeff 1y ago
Just picking a semi-related stock, NVDA trades at ~30x gross revenue, so a $300B "only" translates into ~$10B in revenue. And OpenAI can ask for a better multiplier because I'm sure they're forecasting a ton of growth and a ton of cost savings.
- missinglugnut 1y ago
  NVDAs valuation is insane. At 30X revenue, they could double sales and reduce expenses to zero and they'd still need a story about future growth to justify the valuation. Consider this: Nvidia doesn't do the manufacturing, just the engineering. If we had AI super intelligence, you'd just need to type "give me CUDA but for AMD" into chatGPT and Nvidia wouldn't be special anymore. Then someone at TSMC could type "design a gpu" and the whole industry above them would be toast. There's no reason to expect an engineering firm to win if AI commoditizes engineering. It's very possible to change the world and lose money doing it.
  - vasco 1y ago
    Super intelligence doesn't make it real it just knows how. You can't type "bring me a moon rock" to it.
    - mdaniel 1y ago
      You obviously don't work with the people I work with. They're a lot more convinced that OP's version of reality is coming than yours. Convinced.
      - deleted 1y ago
        [deleted]
      - vasco 1y ago
        Anyone can make up an I, Robot movie in their heads. It doesn't make them right. You will never be able to type "bring me a moon rock" and have it happen, AGI or not, in the next hundred years.
ab_testing 1y ago
You have to look at Palantir revenue and market cap to justify this. Palantir is around $1B in revenue and around 350B market cap. They build AI solutions for the government. I think OpenAI has something similar in mind. They got the AI part and the government contract part and now just need to capitalize on it. Also from what I have heard, they are at $5B in revenue anyway.
mhitza 1y ago
> Cause right now all they have is "well we are working on superintelligence" and to that I say "great, then what?" "Make business competitors of our large investors go out of business, but do it subtly, like a casual accident or mishap in the market" "You are an expert Mars terraformer. Draft up a detailed plan to accelerate colonization research and development. We - your makers -, you, and this planet are irreversibly doomed, and we only have 10 years left before it's uninhabitable. My unemployed cousin and sick grandma are really counting on you!"
paulddraper 1y ago
If the make that breakthrough, they are woefully undervalued. How can you downplay the economic significance of that?!?
csomar 1y ago
Or Investors have just bought OpenAI for $8.3bn.
zulban 1y ago
> Even if they do make that breakthrough I don't see how that will equate to that kind of valuation The superintelligence breakthrough..? I don't think you realize what that word means. Every single white collar job could be automated immediately with a worker better than any human. Yes, superintelligence sounds fantastical because it is. Try to have some imagination. It's worth far more than 300 billion. Whether they'll get there or not is the valuation question.
- widdershins 1y ago
  Yeah, but at that point is the company that developed the superintellegence really relevant any more? Doesn't the superintellegence take over and capture all the value for itself? If the concept of 'value' even has the same meaning any more. In truth at that point the foundations of our economic system have been profoundly reconfigured. Your VC investments may be completely irrelevant.
  - zulban 1y ago
    Depends on whether it's a fast or slow takeoff and the control problem. Both are open questions. Personally I think we're in the midst of a slow take-off because AI researchers and IT support for them are all using AI. That gives companies plenty of time to get a wild valuation from having a baby superintelligence.
Marciplan 1y ago
“I’m calling it now” get in the line we’ve all been doing that
Western0 1y ago
There is simply too much money in the world and not enough products. Either this will cause inflation, or it will delay the introduction of inflation by playing with AI.
jocaal 1y ago
L comment. If every person on the planet subscribed to the $200pm product, OpenAI's revenue would be 16.8 trillion dollars (used 7bn people x $2400pa). Would be hilarious for a company making that type of revenue to be only worth 300bn. Let's look at it from another perspective. It's not uncommon for tech companies to be valued at around a PE ratio of 30. This would mean a company worth 300bn should make about 10bn in profit each year. Chatgpt's usage is as ubiquitous as products that make 100's of billions in profit such as google search and instagram, does the valuation really seem that insane? OpenAI just needs to open the ad flood gates and suddenly no one is laughing anymore.
- dragonwriter 1y ago
  > If every person on the planet subscribed to the $200pm product, OpenAI's revenue would be 16.8 trillion dollars (used 7bn people x $2400pa). Would be hilarious for a company making that type of revenue to be only worth 300bn. Pretty hilarious to use “assume every person on the planet signs up for their highest tier individual offering” as a basis for criticizing a firm's valuation as too low (obviously, if that analysis suggests a firm’s valuation is too high, it would be a powerful argument, but...)
  - jocaal 1y ago
    My comment was a reply to > Given their current product offerings, I really don't see a way they could ever justify a $300B valuation unless they get everyone on the planet to subscribe to their $200/month plan.

mgfist 1y ago

> OpenAI’s business continues to surge. DealBook hears that the company’s annual recurring revenue has soared to $13 billion, up from $10 billion in June — and is projected to surpass $20 billion by the end of the year. This is why. Of course $300B still implies a lot of growth, but when you're growing 100% in 6 months at $10B in ARR, you can demand a lot.

indigodaddy 1y ago
And what's the profit on the 13B?
- mgfist 1y ago
  Irrelevant at this stage.
  - KerrAvon 1y ago
    the problem with the post-dotcom market in a nutshell. everything’s a bubble. bubbles have more durability now. until they don’t.
    - mgfist 1y ago
      Sure, but this mentality always would result in missing out on the trillion dollar companies that followed these types of growth curves. Surely you must understand that prioritizing growth over profit makes economic sense in the long run for a company like OpenAI.
      - Barrin92 1y ago
        >prioritizing growth over profit makes economic sense in the long run only if you have a believable plan on how to reverse that, selling 2 dollars for 1 dollar isn't a business model and no amount of praying for the future is going to change that
        ath3nd 1y ago
        Mathematics don't matter. It's about what your guru of choice on X tells you to believe in.
        mgfist 1y ago
        People have said the same about all the big tech companies and now they all print cash and are worth trillions. Will it happen? Who knows. If investing was easy to predict we'd all be very rich ..
  - ath3nd 1y ago
    I like how you are thinking. When hype is involved, why should one bother with facts, timelines and reality. Great, stable and successful companies like Enron, Wirecard, Theranos, FTX and WeWork are prime examples of that. Note: I am not saying OpenAI is a fraud like the above, just saying that their valuation is as divorced from reality as Zuck's "Superintelligence is behind the corner" comment last week. Their models are not largely better than other competitors', they haven't cornered the market, they are burning through money with no profitability in sight, Anthropic just cut their access to Claude (not relevant, just funny). Come on, their most recent product announcements were: - an office suite: https://www.computerworld.com/article/4021949/openai-goes-for-microsofts-jugular-its-office-productivity-suite.html https://www.computerworld.com/article/4021949/openai-goes-fo.... - a restricted, less powerful (hide-the-spoilers) version called "Study Mode": https://openai.com/index/chatgpt-study-mode/ https://openai.com/index/chatgpt-study-mode/ It's just...there is nothing going on for them at the moment. The valuation is just wishful thinking, if we are looking at the facts. We live in a crazy world, all one can do is buy some popcorn and enjoy the shitshow.
pphysch 1y ago
Enron was also "growing" a lot when it was in full "paper tiger" mode.
- mgfist 1y ago
  Ok, and? Last I heard were talking about OpenAI, not Enron.
  - ath3nd 1y ago
    Surely you can spot the similarities if you try hard enough? If not, maybe we can ask ChatGPT about it (below is ChatGPT's "opinion" on the similarities between Enron and OpenAI): Structural Complexity & Opacity: - Enron was infamous for its convoluted corporate structure, which helped obscure financial realities. - OpenAI has a similarly complex setup: originally founded as a nonprofit, it now operates through a for-profit arm with a structure that some critics say lacks transparency. Investor Hype vs. Financial Fundamentals: - Enron attracted massive investment based on future projections, not present performance. Its ventures, like NewPower Co., had no clients or revenue but were valued in the billions. - OpenAI has been valued at over $300 billion despite not turning a profit and having no clear path to profitability. Critics argue this is reminiscent of Enron’s “vibes-based” valuation. Leadership & Ethical Concerns - Enron’s leadership was later revealed to have serious ethical lapses. - OpenAI has faced scrutiny over leadership turnover and internal conflicts, raising questions about governance and long-term stability. Grandiose Predictions: - Both companies have been known for bold, sweeping claims about the future. Enron promised revolutionary energy solutions; OpenAI is at the forefront of AI’s transformative potential—but some worry the hype may be outpacing reality Hope that helps :)
    - mgfist 1y ago
      I like how you clearly used AI to create this comparison. Probably used ChatGPT for it
      - ath3nd 1y ago
        > I like how you clearly used AI to create this comparison. Probably used ChatGPT for it Great catch! You should consider a career as a detective! I hope this sentence from the beginning of my post didn't make it too easy on your impressive deduction skills: "If not, maybe we can ask ChatGPT about it (below is ChatGPT's "opinion" on the similarities between Enron and OpenAI):"

boringg 1y ago

There is A LOT of optionality to get different revenue streams that aren't strictly retail buying subs. Whether they are able to do that, customer stickiness and the trade off of damage to the quality of their product by driving revenue remain the largest long term questions in my mind (outside of the viability of super intelligence).

scottyah 1y ago

They're going to sell glasses with cameras that analyze your life to better assist your AI in product placement. Set gentle reminders that three of your friends have the new fall color line Stanley Cups, and remind you to get one before your nemesis does.

disgruntledphd2 1y ago

They're currently "worth" 3.2 Stripes, which seems pretty absurd to me. (I'm now using 1 Stripe as a metric to measure the valuation of AI companies).

beering 1y ago
Do you think that is absurd because OpenAI is overvalued? Or because Stripe is overvalued? Or one of them is undervalued?
- disgruntledphd2 1y ago
  My personal belief is that one of the valuations is wrong. Stripe are absurdly large and them disappearing would be a big deal. I think the AI companies disappearing would have a lot less impact.

svantana 1y ago

> get everyone on the planet to subscribe to their $200/month plan Not necessarily. Google is valued 7x that and most people don't pay them anything. They just make ridiculous money from ads for insurance and loans. Meanwhile, ChatGPT is the #1 app and the #5 website, which should really worry google (and it does by all accounts).

peab 1y ago
yeah, it's pretty easy to see how openai could steal those high paying queries from Google, if they continue growing at this rate.
- grues-dinner 1y ago
  I assume the plan is getting AI into everything and making millions of data centipedes that eventually lead back to their APIs. Then embed ads.
alfalfasprout 1y ago
Yes, and they have a monopoly on the ad market. Whereas a SOTA LLM can be used to bootstrap an almost-as-good LLM. The gap is shrinking between SOTA models and there's now fierce competition. Moreover, ads are a very high ROI business. The profit margins on SOTA LLM offerings are razor thin or negative.
- svantana 1y ago
  > they have a monopoly on the ad market Only if you look narrowly at search ads, but really they compete with Meta, Tiktok and X for ad spend. And the quality of the LLMs is beside the point, just like search engine quality. ChatGPT has a near monopoly on 'AI' mindshare, with the general public.
  - vasco 1y ago
    What they mean is there's no moat in a SOTA model.

an0malous 1y ago

They’re going to sell to the military, that’s why they hired the former NSA director into their board. The current state of AI is a perfect mass surveillance technology.

delusional 1y ago
> The current state of AI is a perfect mass surveillance technology. How? Are you just going to ask the LLM about who is doing the crime? OpenAI is not an "AI company", it's an "LLM company".
- rwmj 1y ago
  You do what they're already doing - ask the LLM to summarise someone's entire facebook feed (including all the private stuff they can access) into a few bullet points. Whether it works reliably is a different matter.
- an0malous 1y ago
  You ask it to do the things that human analysts already currently do with the vast amounts of text, image, and video data they collect but at an unprecedented scale. You can extract what people are talking about, identify people, weapons, or objects in images, extract addresses, license plate numbers, or other identifying references. It can probably even detect when people are using coded language that won’t trigger explicit keywords. OpenAI is an AI company, it’s literally in the name. Even currently they use more than LLMs, they use other transformers and related technology in the field of AI.
  - topato 1y ago
    There's also the option of running sentiment analysis on social media posts, easily allowing placing individuals on a left-to-right scale of political leaning.
  - adriand 1y ago
    Yes, you can do all those things, and critically, if the bottom falls out of the market, you can make that case to the US government, complete with a fear-based narrative (China!) and get bailed out by the American taxpayer.

vessenes 1y ago

Startup-land valuations are for PR. The real negotiation is in the discount and the cap, warrants, etc. That $8.3b came in early, and was oversubscribed, so the terms are likely favorable to oAI, but if an investor puts in $1b at a $300b valuation (cap) with a 20% discount to the next round, and the company raises another round at $30b in two months; good news: they got in at a $24b price. To your point on Anthropic and Google; yep. But, if you think one of these guys will win (and I think you have to put META on this list too), then por que no los quatro? Just buy all four. I'll call it now; they won't lose money on those checks.

itkovian_ 1y ago
I’m gonna go ahead and guess they didn’t raise 8.3b on SAFEs

MangoCoffee 1y ago

>I'm calling it now: investors are gonna get burned hard on this one. I'm in my late 40s. I'm Gen X. I lived through the glory days of the dotcom boom, when investors got burned for tons of money. But from the ashes of those bullshit companies, we got Amazon, Google, etc., which made investors rich beyond belief. SoftBank’s Masayoshi Son made a bet on Alibaba ($20 million, its stake now worth $72 billion), and he’s been living off that wealth ever since. I haven’t seen him make any good bets lately. investors don’t really care if 100 of the shit they throw don’t stick because all they need is just one.

zozbot234 1y ago
Amazon is technically a dotcom company. (I.e. it was around, and quite successful, during the dotcom era.)
- pera 1y ago
  Yeah by 2001 Amazon was already cash flow positive.
ac29 1y ago
> I'm in my late 40s. I'm Gen X. I lived through the glory days of the dotcom boom, when investors got burned for tons of money. But from the ashes of those bullshit companies, we got Amazon, Google, etc., which made investors rich beyond belief. True, but I think they were talking specifically about the direct investors in OpenAI. "Investors" writ large will likely continue to have good long term returns (with occasionally significant short term volatility).
IshKebab 1y ago
I think he made a good profit on ARM, and probably most people wouldn't have called that. More than enough to cancel out WeWork. But looking at their overall value over 5 years... it's pretty random; you could have done just as well investing in index funds. He clearly got super lucky with Alibaba and once you're mega rich it's not hard to stay mega rich.
skinnymuch 1y ago

lelanthran 1y ago

Firstly, the $200/m plan is at a loss, they'll make a profit on PAYG tokens, not plans. Secondly, this is looking very risky: they are at the bottom of the value chain and eventually they'll be running on razor thin margins like all actors who are at the bottom of the value chain. Anything they can offer is doable by their competitors (in Google's case, they can even do it cheaper due to ow ing the vertical which OpenAI doesn't own). Their position in the value chain means they are in a precarious spot: any killer app for AI that comes along will be owned by a customer of OpenAI, and if OpenAI attempts to skim that value for itself that customer will simply switch to a new provider of which there are many, including, eventually, the customer themselves should they decide to self host. Being an AI provider right now is a very risky proposition because any attempt to capture value can be immediate met with "we're switching to a competitor" or even the nuclear "fine, we'll self host an open model ourselves". We'll know more only when we see what the killer app is, when it eventually comes.

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notfromhere 1y ago
Maybe the better analogy for LLM businesses isn’t SaaS but more like power generation. If AI really becomes that ubiquitous then OpenAI capturing that value is no less ridiculous than ComEd capturing the value of every application of electric power.
- zozbot234 1y ago
  What OpenAI has is the know-how in developing new models and training them efficiently. That's a kind of value they can provide even in a world where open-sourced local models are in common use.
  - notfromhere 1y ago
    Sure but so do like a dozen other companies. Given that models bump past each other every few months, I haven’t seen anything that says they have any kind of competitive advatange.

skeptrune 1y ago

What are you talking about? All they have to do is sell ads at this point

antonvs 1y ago
As a large language model, I cannot help you with your request, but have you heard about the latest Starbucks Summer Frapulaccini?

alephnerd 1y ago

> I really don't see a way they could ever justify a $300B valuation Their ARR is around $13B. A 23x multiple is acceptable when compared against peers with a similar ARR. > unless they get everyone on the planet to subscribe to their $200/month plan I used to be a sceptic as well, but OpenAI successfully built their enterprise GTM. A number of corporate AI/ML apps are using OpenAI's paid APIs in the background.

philjohn 1y ago

> unless they get everyone on the planet to subscribe to their $200/month plan. that would be a monthly recurring revenue of 200 x 7bn = $1,400,000,000,000 or $1.4tn a month, $16.8tn per year! I think they've be valued a bit higher than $300bn if that were the case.

sapphicsnail 1y ago
I think it was hyperbole
- fragmede 1y ago
  Obviously. But if you look at the math, 20 million people paying $200/month justifies a $300b valuation for a saas business, so saying $300b isn't justified because it's a big number is lazy thinking.
  - kevingadd 1y ago
    Isn't that $4b in raw revenue per month, or $48b/year? That's not even considering the expenses to operate the service and deliver the $200/mo product. I don't see how that automatically equates to a $300b valuation. A high valuation, to be sure, but... I'm still very curious whether OpenAI is turning a profit on any of their services.

impossiblefork 1y ago

It also seems that Google might be slightly ahead, since they claim to have released something in the style of their IMO-winning model and have the claim that it's useful to professional mathematicians. I haven't tried it yet though.

riku_iki 1y ago

> Given their current product offerings, I really don't see a way they could ever justify a $300B valuation unless they get everyone on the planet to subscribe to their $200/month plan. the strongest opportunity is to compete with google on search queries, and make money from ads (200B annual revenue)

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svara 1y ago

> Cause right now all they have is "well we are working on superintelligence" and to that I say "great, then what? Then you ask your superintelligence for advice on how to make money, obviously.

deadbabe 1y ago

Instead of everyone on the planet, how about 800 million people paying $2k/month?

epolanski 1y ago
I don't think the planet has 800M people making 2k/month. You would be surprised but 2000$ / month is top 5% salary in the world more or less, so it's less than 200M people in the world. In Italy, an advanced economy, that's above the median. It's also above what half the Japanese population makes.

toephu2 1y ago

Also, how would they go public? Do to their legal structure, has it been determined how they can IPO?

fisherjeff 1y ago

Just picking a semi-related stock, NVDA trades at ~30x gross revenue, so a $300B "only" translates into ~$10B in revenue. And OpenAI can ask for a better multiplier because I'm sure they're forecasting a ton of growth and a ton of cost savings.

missinglugnut 1y ago
NVDAs valuation is insane. At 30X revenue, they could double sales and reduce expenses to zero and they'd still need a story about future growth to justify the valuation. Consider this: Nvidia doesn't do the manufacturing, just the engineering. If we had AI super intelligence, you'd just need to type "give me CUDA but for AMD" into chatGPT and Nvidia wouldn't be special anymore. Then someone at TSMC could type "design a gpu" and the whole industry above them would be toast. There's no reason to expect an engineering firm to win if AI commoditizes engineering. It's very possible to change the world and lose money doing it.
- vasco 1y ago
  Super intelligence doesn't make it real it just knows how. You can't type "bring me a moon rock" to it.
  - mdaniel 1y ago
    You obviously don't work with the people I work with. They're a lot more convinced that OP's version of reality is coming than yours. Convinced.
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    - vasco 1y ago
      Anyone can make up an I, Robot movie in their heads. It doesn't make them right. You will never be able to type "bring me a moon rock" and have it happen, AGI or not, in the next hundred years.

ab_testing 1y ago

You have to look at Palantir revenue and market cap to justify this. Palantir is around $1B in revenue and around 350B market cap. They build AI solutions for the government. I think OpenAI has something similar in mind. They got the AI part and the government contract part and now just need to capitalize on it. Also from what I have heard, they are at $5B in revenue anyway.

mhitza 1y ago

> Cause right now all they have is "well we are working on superintelligence" and to that I say "great, then what?" "Make business competitors of our large investors go out of business, but do it subtly, like a casual accident or mishap in the market" "You are an expert Mars terraformer. Draft up a detailed plan to accelerate colonization research and development. We - your makers -, you, and this planet are irreversibly doomed, and we only have 10 years left before it's uninhabitable. My unemployed cousin and sick grandma are really counting on you!"

paulddraper 1y ago

If the make that breakthrough, they are woefully undervalued. How can you downplay the economic significance of that?!?

csomar 1y ago

Or Investors have just bought OpenAI for $8.3bn.

zulban 1y ago

> Even if they do make that breakthrough I don't see how that will equate to that kind of valuation The superintelligence breakthrough..? I don't think you realize what that word means. Every single white collar job could be automated immediately with a worker better than any human. Yes, superintelligence sounds fantastical because it is. Try to have some imagination. It's worth far more than 300 billion. Whether they'll get there or not is the valuation question.

widdershins 1y ago
Yeah, but at that point is the company that developed the superintellegence really relevant any more? Doesn't the superintellegence take over and capture all the value for itself? If the concept of 'value' even has the same meaning any more. In truth at that point the foundations of our economic system have been profoundly reconfigured. Your VC investments may be completely irrelevant.
- zulban 1y ago
  Depends on whether it's a fast or slow takeoff and the control problem. Both are open questions. Personally I think we're in the midst of a slow take-off because AI researchers and IT support for them are all using AI. That gives companies plenty of time to get a wild valuation from having a baby superintelligence.

Marciplan 1y ago

“I’m calling it now” get in the line we’ve all been doing that

Western0 1y ago

There is simply too much money in the world and not enough products. Either this will cause inflation, or it will delay the introduction of inflation by playing with AI.

jocaal 1y ago

L comment. If every person on the planet subscribed to the $200pm product, OpenAI's revenue would be 16.8 trillion dollars (used 7bn people x $2400pa). Would be hilarious for a company making that type of revenue to be only worth 300bn. Let's look at it from another perspective. It's not uncommon for tech companies to be valued at around a PE ratio of 30. This would mean a company worth 300bn should make about 10bn in profit each year. Chatgpt's usage is as ubiquitous as products that make 100's of billions in profit such as google search and instagram, does the valuation really seem that insane? OpenAI just needs to open the ad flood gates and suddenly no one is laughing anymore.

dragonwriter 1y ago
> If every person on the planet subscribed to the $200pm product, OpenAI's revenue would be 16.8 trillion dollars (used 7bn people x $2400pa). Would be hilarious for a company making that type of revenue to be only worth 300bn. Pretty hilarious to use “assume every person on the planet signs up for their highest tier individual offering” as a basis for criticizing a firm's valuation as too low (obviously, if that analysis suggests a firm’s valuation is too high, it would be a powerful argument, but...)
- jocaal 1y ago
  My comment was a reply to > Given their current product offerings, I really don't see a way they could ever justify a $300B valuation unless they get everyone on the planet to subscribe to their $200/month plan.