5 ms·

There’s one key difference in my opinion: pre-.com deals were buying revenue with equity and nothing else. It was growth for growth’s sake. All that scale deliv

There’s one key difference in my opinion: pre-.com deals were buying revenue with equity and nothing else. It was growth for growth’s sake. All that scale delivered mostly nothing. OpenAI applies the same strategy, but they’re using their equity to buy compute that is critical to improving their core technology. It’s circular, but more like a flywheel and less like a merry-go-round. I have some faith it could go another way.

Arkhaine_kupo 1y ago
> they’re using their equity to buy compute that is critical to improving their core technology But we know that growth in the models is not exponential, its much closer to logarithmic. So they spend =equity to get >results. The ad spend was a merry go round, this is a flywheel where the turning grinds its gears until its a smooth burr. The math of the rising stock prices only begins to make sense if there is a possible breakthrough that changes the flywheel into a rocket, but as it stands its running a lemonade stand where you reinvest profits into lemons that give out less juice
- J_McQuade 1y ago
  There is something about an argument made almost entirely out of metaphors that amuses me to the point of not being able to take it seriously, even if I actually agree with it.
  - powerhouse007 1y ago
    As much as I dislike metaphors, this sounded reasonable to me. Just don't go poking holes in the metaphor instead of the real argument.
    - gilleain 1y ago
      Indeed, poking holes in the metaphor is like putting a pin in a balloon, rather than knocking it out of the park by addressing the real argument.
- DenisM 1y ago
  OpenAI invests heavily into integration with other products. If model development stalls they just need to be not worse than other stalled models while taking advantage of brand recognition and momentum to stay ahead in other areas. In that sense it makes sense to keep spending billions even f model development is nearing diminishing return - it forces competition to do the same and in that game victory belongs to the guy with deeper pockets. Investors know that, too. A lot of startup business is a popularity contents - number one is more attractive for the sheer fact of being number one. If you’re a very rational investor and don’t believe in the product you still have to play this game because others are playing it, making it true. The vortex will not stop unless limited partners start pushing back.
  - otherjason 1y ago
    But, if model development stalls, and everyone else is stalled as well, then what happens to turn the current wildly-unprofitable industry into something that "it makes sense to keep spending billions" on?
    - accrual 1y ago
      I suspect if model development stalls we may start to see more incremental releases to models, perhaps with specific fixes or improvements, updates to a certain cutoff date, etc. So less fanfare, but still some progress. Worth spending billions on? Probably not, but the next best avenue would be to continue developing deeper and deeper LLM integrations to stay relevant and in the news. The new OpenAI browser integration would be an example. Mostly the same model, but with a whole new channel of potential customers and lock in.
    - camdenreslink 1y ago
      If model development stalls, then the open weight free models will eventually totally catch up. The model itself will become a complete commodity.
      - DenisM 1y ago
        It very well might. The ones with most smooth integrations and applications will win. This can go either way. For databases open source integration tools prevailed, the commercial activity left hosting those tools. But enterprise software integration that might end up mostly proprietary.
- brokencode 1y ago
  Yeah, except you can keep on squeezing these lemons for a long time before they run out of juice. Even if the model training part becomes less worthwhile, you can still use the data centers for serving API calls from customers. The models are already useful for many applications, and they are being integrated into more business and consumer products every day. Adoption is what will turn the flywheel into a rocket.
  - mentalgear 1y ago
    Well, the thing is that that kind of hardware chips quickly decrease in value. It's not like the billions spend in past bubbles like the 2000s where internet infrastructure was build (copper, fibre) or even during 1950s where transport infrastructure (roads) were build.
    - brokencode 1y ago
      Data centers are massive infrastructural investments similar to roads and rails. They are not just a bunch of chips duct taped together, but large buildings with huge power and networking requirements. Power companies are even constructing or recommissioning power plants specifically to meet the needs of these data centers. All of these investments have significant benefits over a long period of time. You can keep on upgrading GPUs as needed once you have the data center built. They are clearly quite profitable as well, even if the chips inside are quickly depreciating assets. AWS and Azure make massive profits for Amazon and Microsoft.
- sidewndr46 1y ago
  There's at least one contributor here on HN that believes growth in models is strictly exponential: https://www.julian.ac/blog/2025/09/27/failing-to-understand-the-exponential-again/ https://www.julian.ac/blog/2025/09/27/failing-to-understand-...
ignoramous 1y ago
> There’s one key difference in my opinion The other difference (besides Sam's deal making ability) is, willing investors: Nvidia's stock rally leaves it with a LOT of room to fund big bets right now. While in Oracle's case, they probably see GenAI as a way to go big in the Enterprise Cloud business.
- afavour 1y ago
  > Nvidia's stock rally leaves it with a LOT of room to fund big bets right now And then what happens if the stock collapses?
  - mulmen 1y ago
    Hence the emphasis on right now.
moralestapia 1y ago
>they’re using their equity to buy compute that is critical to improving their core technology That's only like 1/8th of the flywheel, though.
api 1y ago
The assumption is that they have a large moat. If they don't then they're spending a ton of money to level up models and tech now, but others will eventually catch up and their margins will vanish. This will be true if (as I believe) AI will plateau as we run out of training data. As this happens, CPU process improvements and increased competition in the AI chip / GPU space will make it progressively cheaper to train and run large models. Eventually the cost of making models equivalent in power to OpenAI's models drops geometrically to the point that many organizations can do it... maybe even eventually groups of individuals with crowdfunding. OpenAI's current big spending is helping bootstrap this by creating huge demand for silicon, and that is deflationary in terms of the cost of compute. The more money gets dumped into making faster cheaper AI chips the cheaper it gets for someone else to train GPT-5+ competitors. The question is whether there is a network effect moat similar to the strong network effect moats around OSes, social media, and platforms. I'm not convinced this will be the case with AI because AI is good at dealing with imprecision. Switching out OpenAI for Anthropic or Mistral or Google or an open model hosted on commodity cloud is potentially quite easy because you can just prompt the other model to behave the same way... assuming it's similar in power.
- simgt 1y ago
  > This will be true if (as I believe) AI will plateau as we run out of training data. Why would they run out of training data? They needed external data to bootstrap, now it's going directly to them through chatgpt or codex.
  - delis-thumbs-7e 1y ago
    As much ChatGPT says I’m basically a genius for asking it a good Vegan cake recipes, I don’t think that is providing it any data it doesn’t already have that makes it anyway better. Also at this point the massive increases in data and computing power seem to bring ever decreasing improvements (and sometimes just decline), so it seems we are simply hitting a limit this kind of architecture can achieve no matter what you throw at it.
    - 1y ago
_heimdall 1y ago
I think that, at best, that description boils down to Nvidia, Oracle, etc inventing fake wealth to build something and OpenAI building their own fake wealth by getting to use that new compute effectively for free. There are physical products involved, but the situation otherwise feels very similar to ads prior to dotcom.
- slashdev 1y ago
  The same way the stock market invents a trillion dollars of fake wealth on a strong up day? That's capital markets working as intended. It's not necessarily doomed to end in a fiery crash, although corrections along the way are a natural part of the process. It seems very bubbly to me, but not dotcom level bubbly. Not yet anyway. Maybe we're in 1998 right now.
  - staticautomatic 1y ago
    I sell you a cat for $1B and you sell me a dog for $1B and now we’re both billionaires! Whether the capital markets “want” that or not it’s still silly.
    - slashdev 1y ago
      If we’re both willing to pay that in a free market economy, then we both leave the deal happy. Things are worth what people are willing to pay for them. And that can change over time. Sentiment matters more than fundamental value in the short term. Long term, on a timescale of a decade or more, it’s different.
      - overfeed 1y ago
        > If we’re both willing to pay that in a free market economy The thing is: you've paid nothing - all you did was trade pets and played an accounting trick to make them seem more valuable than they are.
      - fireflash38 1y ago
        Is that not fraud?
brazukadev 1y ago
Yes, this time is different, trust big bro sama.
deleted 1y ago
[deleted]
bayarearefugee 1y ago
> critical to improving their core technology It is at the very least highly debatable how much their core technology is improving from generation to generation despite the ballooning costs.
0xbadcafebee 1y ago
Eventually when ChatGPT replaces Google Search, they will run ads, and so have that whole revenue stream. Still isn't enough money to buy the trillions worth of infrastructure they want, but it might be enough to keep the lights on.
- schmidtleonard 1y ago
  That's an insightful point! Making insightful points like that one is taxing on the brain, you should consider an electolyte drink like Brawndo™ (it's got what plants crave) to keep yourself sharp! Ugh I hate it so much, but you're right, it's coming.
  - upboundspiral 1y ago
    One thing I've been contemplating lately is that from a business perspective, when your competitors expand their revenue avenues (generally through ads) you have three options: copy them to catch up, do nothing and perish, and lobby the government for increased consumer protections. I've started to wonder why we see so few companies do this. It's always "evil company lobbying to harm the its customers and the nation." Companies are made up of people, and for myself, if I was at a company I would be pushing to lobby on behalf of consumers to be able to keep a moral center and sleep at night. I am strongly for making money, but there are certain things I am not willing to do for it. Targeted advertising is one of these things that I believe deserves to fully die. I have nothing against general analytics, nor gathering data about trends etc, but stalking every single person on the internet 24/7 is something people are put in jail for if they do it in person.
- yosame 1y ago
  Why would ChatGPT replace google search when search also has AI? At best they'd steal some of Google's market share, which I'd imagine would decline with embedded ads.
  - 0xbadcafebee 1y ago
    Two reasons: 1) Google Search is now 99% crap that nobody wants, and even the AI answers are largely crap, 2) I believe somebody is going to eventually realize that search engines are stupid and improve on them. The whole idea of a single text box where you type some words and the search engine reads your mind to figure out the one thing you wanted, and then gives you one generic answer, is crap. We've just been blind to this because we don't see any other answer to realize we've been getting crap. If I type in "when did MMS come out", Google will tell me when the candy product M&M's came out. But I wanted to know when the Multimedia Messaging Service was released. At some point somebody is going to realize that you can't actually tell what the hell the person wants from these simple queries alone. The computer needs to ask you questions to narrow down the field. That's sometimes what happens in ChatGPT, but it can be greatly improved with simple buttons/drop-downs/filters/etc. I think it'll also be improved by more dynamic and continuous voice input for context. (I notice Google Search now has audio input; I wonder if that came in after ChatGPT? Wayback Machine shows it starting in mid-2024) When they eventually implement all this, and people realize it's a million times better than what Google has, then Google will be playing catch-up.
SecretDreams 1y ago
> I have some faith it could go another way. I wonder how they felt during the .com era.
bgwalter 1y ago
Dotcom scams included "vendor financing", where telecom equipment providers invested in their customers who built infrastructure: https://time.com/archive/6931645/how-the-once-luminous-lucent-got-into-double-trouble/ https://time.com/archive/6931645/how-the-once-luminous-lucen... The customers bought real equipment that was claimed to be required for the "exponential growth" of the Internet. It is very much like building data centers.
runarberg 1y ago
Wasn’t there also a bunch of telecom infrastructure created in the dot-com bubble, tangible products created, etc? Things like servers, telephone wires, underwater internet cables, tech-storefronts, internet satellites, etc.
- spogbiper 1y ago
  so much fiber was run that in the US over 90% of it wasn't even used
some_guy_nobel 1y ago
> OpenAI applies the same strategy, but they’re using their equity to buy compute that is critical to improving their core technology. It’s circular, but more like a flywheel and less like a merry-go-round. I have some faith it could go another way. I'm commenting here in case a large crash occurs, to have a nice relic of the zeitgeist of the time.
- zemvpferreira 1y ago
  Happy to have provided. I’m not an AI bull and not in any way invested in the U.S. economy besides a little money in funds, but I do try to think about the war of today vs the war of yesterday. Hopefully that’s always en vogue.

Arkhaine_kupo 1y ago

> they’re using their equity to buy compute that is critical to improving their core technology But we know that growth in the models is not exponential, its much closer to logarithmic. So they spend =equity to get >results. The ad spend was a merry go round, this is a flywheel where the turning grinds its gears until its a smooth burr. The math of the rising stock prices only begins to make sense if there is a possible breakthrough that changes the flywheel into a rocket, but as it stands its running a lemonade stand where you reinvest profits into lemons that give out less juice

J_McQuade 1y ago
There is something about an argument made almost entirely out of metaphors that amuses me to the point of not being able to take it seriously, even if I actually agree with it.
- powerhouse007 1y ago
  As much as I dislike metaphors, this sounded reasonable to me. Just don't go poking holes in the metaphor instead of the real argument.
  - gilleain 1y ago
    Indeed, poking holes in the metaphor is like putting a pin in a balloon, rather than knocking it out of the park by addressing the real argument.
DenisM 1y ago
OpenAI invests heavily into integration with other products. If model development stalls they just need to be not worse than other stalled models while taking advantage of brand recognition and momentum to stay ahead in other areas. In that sense it makes sense to keep spending billions even f model development is nearing diminishing return - it forces competition to do the same and in that game victory belongs to the guy with deeper pockets. Investors know that, too. A lot of startup business is a popularity contents - number one is more attractive for the sheer fact of being number one. If you’re a very rational investor and don’t believe in the product you still have to play this game because others are playing it, making it true. The vortex will not stop unless limited partners start pushing back.
- otherjason 1y ago
  But, if model development stalls, and everyone else is stalled as well, then what happens to turn the current wildly-unprofitable industry into something that "it makes sense to keep spending billions" on?
  - accrual 1y ago
    I suspect if model development stalls we may start to see more incremental releases to models, perhaps with specific fixes or improvements, updates to a certain cutoff date, etc. So less fanfare, but still some progress. Worth spending billions on? Probably not, but the next best avenue would be to continue developing deeper and deeper LLM integrations to stay relevant and in the news. The new OpenAI browser integration would be an example. Mostly the same model, but with a whole new channel of potential customers and lock in.
  - camdenreslink 1y ago
    If model development stalls, then the open weight free models will eventually totally catch up. The model itself will become a complete commodity.
    - DenisM 1y ago
      It very well might. The ones with most smooth integrations and applications will win. This can go either way. For databases open source integration tools prevailed, the commercial activity left hosting those tools. But enterprise software integration that might end up mostly proprietary.
brokencode 1y ago
Yeah, except you can keep on squeezing these lemons for a long time before they run out of juice. Even if the model training part becomes less worthwhile, you can still use the data centers for serving API calls from customers. The models are already useful for many applications, and they are being integrated into more business and consumer products every day. Adoption is what will turn the flywheel into a rocket.
- mentalgear 1y ago
  Well, the thing is that that kind of hardware chips quickly decrease in value. It's not like the billions spend in past bubbles like the 2000s where internet infrastructure was build (copper, fibre) or even during 1950s where transport infrastructure (roads) were build.
  - brokencode 1y ago
    Data centers are massive infrastructural investments similar to roads and rails. They are not just a bunch of chips duct taped together, but large buildings with huge power and networking requirements. Power companies are even constructing or recommissioning power plants specifically to meet the needs of these data centers. All of these investments have significant benefits over a long period of time. You can keep on upgrading GPUs as needed once you have the data center built. They are clearly quite profitable as well, even if the chips inside are quickly depreciating assets. AWS and Azure make massive profits for Amazon and Microsoft.
sidewndr46 1y ago
There's at least one contributor here on HN that believes growth in models is strictly exponential: https://www.julian.ac/blog/2025/09/27/failing-to-understand-the-exponential-again/ https://www.julian.ac/blog/2025/09/27/failing-to-understand-...

ignoramous 1y ago

> There’s one key difference in my opinion The other difference (besides Sam's deal making ability) is, willing investors: Nvidia's stock rally leaves it with a LOT of room to fund big bets right now. While in Oracle's case, they probably see GenAI as a way to go big in the Enterprise Cloud business.

afavour 1y ago
> Nvidia's stock rally leaves it with a LOT of room to fund big bets right now And then what happens if the stock collapses?
- mulmen 1y ago
  Hence the emphasis on right now.

moralestapia 1y ago

>they’re using their equity to buy compute that is critical to improving their core technology That's only like 1/8th of the flywheel, though.

api 1y ago

The assumption is that they have a large moat. If they don't then they're spending a ton of money to level up models and tech now, but others will eventually catch up and their margins will vanish. This will be true if (as I believe) AI will plateau as we run out of training data. As this happens, CPU process improvements and increased competition in the AI chip / GPU space will make it progressively cheaper to train and run large models. Eventually the cost of making models equivalent in power to OpenAI's models drops geometrically to the point that many organizations can do it... maybe even eventually groups of individuals with crowdfunding. OpenAI's current big spending is helping bootstrap this by creating huge demand for silicon, and that is deflationary in terms of the cost of compute. The more money gets dumped into making faster cheaper AI chips the cheaper it gets for someone else to train GPT-5+ competitors. The question is whether there is a network effect moat similar to the strong network effect moats around OSes, social media, and platforms. I'm not convinced this will be the case with AI because AI is good at dealing with imprecision. Switching out OpenAI for Anthropic or Mistral or Google or an open model hosted on commodity cloud is potentially quite easy because you can just prompt the other model to behave the same way... assuming it's similar in power.

simgt 1y ago
> This will be true if (as I believe) AI will plateau as we run out of training data. Why would they run out of training data? They needed external data to bootstrap, now it's going directly to them through chatgpt or codex.
- delis-thumbs-7e 1y ago
  As much ChatGPT says I’m basically a genius for asking it a good Vegan cake recipes, I don’t think that is providing it any data it doesn’t already have that makes it anyway better. Also at this point the massive increases in data and computing power seem to bring ever decreasing improvements (and sometimes just decline), so it seems we are simply hitting a limit this kind of architecture can achieve no matter what you throw at it.
  - 1y ago

_heimdall 1y ago

I think that, at best, that description boils down to Nvidia, Oracle, etc inventing fake wealth to build something and OpenAI building their own fake wealth by getting to use that new compute effectively for free. There are physical products involved, but the situation otherwise feels very similar to ads prior to dotcom.

slashdev 1y ago
The same way the stock market invents a trillion dollars of fake wealth on a strong up day? That's capital markets working as intended. It's not necessarily doomed to end in a fiery crash, although corrections along the way are a natural part of the process. It seems very bubbly to me, but not dotcom level bubbly. Not yet anyway. Maybe we're in 1998 right now.
- staticautomatic 1y ago
  I sell you a cat for $1B and you sell me a dog for $1B and now we’re both billionaires! Whether the capital markets “want” that or not it’s still silly.
  - slashdev 1y ago
    If we’re both willing to pay that in a free market economy, then we both leave the deal happy. Things are worth what people are willing to pay for them. And that can change over time. Sentiment matters more than fundamental value in the short term. Long term, on a timescale of a decade or more, it’s different.
    - overfeed 1y ago
      > If we’re both willing to pay that in a free market economy The thing is: you've paid nothing - all you did was trade pets and played an accounting trick to make them seem more valuable than they are.
    - fireflash38 1y ago
      Is that not fraud?

brazukadev 1y ago

Yes, this time is different, trust big bro sama.

deleted 1y ago

[deleted]

bayarearefugee 1y ago

> critical to improving their core technology It is at the very least highly debatable how much their core technology is improving from generation to generation despite the ballooning costs.

0xbadcafebee 1y ago

Eventually when ChatGPT replaces Google Search, they will run ads, and so have that whole revenue stream. Still isn't enough money to buy the trillions worth of infrastructure they want, but it might be enough to keep the lights on.

schmidtleonard 1y ago
That's an insightful point! Making insightful points like that one is taxing on the brain, you should consider an electolyte drink like Brawndo™ (it's got what plants crave) to keep yourself sharp! Ugh I hate it so much, but you're right, it's coming.
- upboundspiral 1y ago
  One thing I've been contemplating lately is that from a business perspective, when your competitors expand their revenue avenues (generally through ads) you have three options: copy them to catch up, do nothing and perish, and lobby the government for increased consumer protections. I've started to wonder why we see so few companies do this. It's always "evil company lobbying to harm the its customers and the nation." Companies are made up of people, and for myself, if I was at a company I would be pushing to lobby on behalf of consumers to be able to keep a moral center and sleep at night. I am strongly for making money, but there are certain things I am not willing to do for it. Targeted advertising is one of these things that I believe deserves to fully die. I have nothing against general analytics, nor gathering data about trends etc, but stalking every single person on the internet 24/7 is something people are put in jail for if they do it in person.
yosame 1y ago
Why would ChatGPT replace google search when search also has AI? At best they'd steal some of Google's market share, which I'd imagine would decline with embedded ads.
- 0xbadcafebee 1y ago
  Two reasons: 1) Google Search is now 99% crap that nobody wants, and even the AI answers are largely crap, 2) I believe somebody is going to eventually realize that search engines are stupid and improve on them. The whole idea of a single text box where you type some words and the search engine reads your mind to figure out the one thing you wanted, and then gives you one generic answer, is crap. We've just been blind to this because we don't see any other answer to realize we've been getting crap. If I type in "when did MMS come out", Google will tell me when the candy product M&M's came out. But I wanted to know when the Multimedia Messaging Service was released. At some point somebody is going to realize that you can't actually tell what the hell the person wants from these simple queries alone. The computer needs to ask you questions to narrow down the field. That's sometimes what happens in ChatGPT, but it can be greatly improved with simple buttons/drop-downs/filters/etc. I think it'll also be improved by more dynamic and continuous voice input for context. (I notice Google Search now has audio input; I wonder if that came in after ChatGPT? Wayback Machine shows it starting in mid-2024) When they eventually implement all this, and people realize it's a million times better than what Google has, then Google will be playing catch-up.

SecretDreams 1y ago

> I have some faith it could go another way. I wonder how they felt during the .com era.

bgwalter 1y ago

Dotcom scams included "vendor financing", where telecom equipment providers invested in their customers who built infrastructure: https://time.com/archive/6931645/how-the-once-luminous-lucent-got-into-double-trouble/ https://time.com/archive/6931645/how-the-once-luminous-lucen... The customers bought real equipment that was claimed to be required for the "exponential growth" of the Internet. It is very much like building data centers.

runarberg 1y ago

Wasn’t there also a bunch of telecom infrastructure created in the dot-com bubble, tangible products created, etc? Things like servers, telephone wires, underwater internet cables, tech-storefronts, internet satellites, etc.

spogbiper 1y ago
so much fiber was run that in the US over 90% of it wasn't even used

some_guy_nobel 1y ago

> OpenAI applies the same strategy, but they’re using their equity to buy compute that is critical to improving their core technology. It’s circular, but more like a flywheel and less like a merry-go-round. I have some faith it could go another way. I'm commenting here in case a large crash occurs, to have a nice relic of the zeitgeist of the time.

zemvpferreira 1y ago
Happy to have provided. I’m not an AI bull and not in any way invested in the U.S. economy besides a little money in funds, but I do try to think about the war of today vs the war of yesterday. Hopefully that’s always en vogue.