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The main question I have with all of these deals: how much of the deal is OpenAI actually required to buy, versus how much of it is an option for OpenAI to buy?

The main question I have with all of these deals: how much of the deal is OpenAI actually required to buy, versus how much of it is an option for OpenAI to buy? Because if you tot up all of these numbers, it's something like 10× current annual revenue that OpenAI is signing deals for, and if OpenAI is actually committing to all of that spend... there is a serious cash crunch looming. But if OpenAI is merely optioning to spend up to that much, and only has to commit to a tenth of those numbers, well, that's not as threatening to OpenAI as a going concern.

JCM9 1y ago
This does all smell a bit like when WeWork was buying up seemingly every available office for rent. When it came time to actually pay for said offices… oops.
- mike_d 1y ago
  > When it came time to actually pay for said offices… oops I was at WeWork around the time of its downfall. I have a lot of opinions about how that place was ran, but I can assure you pre-pandemic they were buying up every office space because they were filling them with tenants. Not paying for offices was a result of tenants not paying due to the pandemic.
  - JCM9 1y ago
    And these GPUs aren’t sitting idle either. Nobody is questioning that they “need” the compute, it’s the lack of a viable business model to pay for all this long term that has folks worried. That’s the same as what happened when WeWork was buying up office space pre-pandemic and then using handwavy nonsense like “Community Adjusted EBITDA” as part of the smoke and mirrors to pretend like there was an actual business there. The pandemic expedited the pain, but the business model was broken and folks called BS long before Covid hit.
    - treis 1y ago
      >it’s the lack of a viable business model to pay for all this long term that has folks worried. They're going to sell ads at the moment people are looking to buy stuff. It's the single most viable business model we've ever seen.
      - jcranmer 1y ago
        I know that "ads" is the popular assumption for how you're supposed to make money, but most sites don't really make all that much money with ads. Facebook and Google aren't rich from selling ads, they're rich from all of the ad infrastructure and quite frankly their ability to follow you around on the internet. Besides, how are ads on ChatGPT supposed to work? If some student is asking it to write their paper for them, is ChatGPT going to stop in the middle of it and go "Hey, you know what sounds good right now? A nice bowl of soup..." Although admittedly that would make for some hilarious proof of people using AI for things they shouldn't...
        vlovich123 1y ago
        People regularly ask ChatGPT for product recommendations of all kinds, explicit and implicit. ChatGPT will also probably be selling ad infrastructure to inject ads just like Google injects ads into search. They probably will pay out little to websites that include the “ChatGPT” widget to integrate ChatGPT with their site that also has ads. Right now the barriers are technical for injecting ads into AI responses.
        XorNot 1y ago
        That directly tanks the entire value of AI though. As an advanced research engine, knowing it will reliably only recommend you sponsored products means it's worthless - and worse it will be primed to advocate for sponsored products. Then the whole thing becomes a scam engine, because check out what Facebook ads look like today.
        1y ago
  - asah 1y ago
    WeWork was taking on long term liability commitments and paying for them with short term revenue commitments. One bad thing and poof. Everybody in the commercial real estate market saw this coming. OpenAI maybe in the same situation, committed to spending $1.4T while enjoying a good revenue year this year but then One Bad Thing and poof.
  - rchaud 1y ago
    WW was able to fill those offices by charging well below market prices, because they were VC-funded so growth was more important than profitability. OpenAI is doing the same. 800m users, the vast majority of whom are free users who won't convert to paid.
    - winstonp 1y ago
      won't? i doubt that. can't tell you the last time i paid $20/mo for any non-business sub, but i've paid for some combo of openai+claude for last year
jsnell 1y ago
It's actually more like 100x their current revenue; they stated last week[0] that they have spending commitments for $1.4T of compute. Or, well, they stated that the TCO of the compute they have commitments for is $1.4T, which is a somewhat strange phrasing. I assume it's due to it being a mix of self-owned vs. rental compute, and what they mean is the TCO to OpenAI rather than the TCO to the owner of the compute. [0] https://x.com/sama/status/1983584366547829073 https://x.com/sama/status/1983584366547829073
- JCM9 1y ago
  That’s absolutely insane. I get that folks are now just engaged in “keeping up with the Jones’” FOMO behavior but none of this is making any sense.
  - gooodvibes 1y ago
    The real massive revenues that the big tech companies are having aren't going to disappear just because OpenAI goes away.
    - DavidPiper 1y ago
      The real revenues of small and mid-sizes tech companies might, though. Which might be funny (in a Road Runner & Wile E. Coyote way) but only after considerable time and distance. Saying that, I think of those guys from The Big Short being reprimanded for celebrating their prediction of a market crash. The financial impact if the whole AI space loses even 50% of its current "valuation" will be huge. The financial impact of the whole AI space continuing at its current velocity is... More of whatever is going on now?
- jcranmer 1y ago
  I went to 10× revenue because I figured the ~$1 trillion was over something like a decade, rather than over a year.

JCM9 1y ago

This does all smell a bit like when WeWork was buying up seemingly every available office for rent. When it came time to actually pay for said offices… oops.

mike_d 1y ago
> When it came time to actually pay for said offices… oops I was at WeWork around the time of its downfall. I have a lot of opinions about how that place was ran, but I can assure you pre-pandemic they were buying up every office space because they were filling them with tenants. Not paying for offices was a result of tenants not paying due to the pandemic.
- JCM9 1y ago
  And these GPUs aren’t sitting idle either. Nobody is questioning that they “need” the compute, it’s the lack of a viable business model to pay for all this long term that has folks worried. That’s the same as what happened when WeWork was buying up office space pre-pandemic and then using handwavy nonsense like “Community Adjusted EBITDA” as part of the smoke and mirrors to pretend like there was an actual business there. The pandemic expedited the pain, but the business model was broken and folks called BS long before Covid hit.
  - treis 1y ago
    >it’s the lack of a viable business model to pay for all this long term that has folks worried. They're going to sell ads at the moment people are looking to buy stuff. It's the single most viable business model we've ever seen.
    - jcranmer 1y ago
      I know that "ads" is the popular assumption for how you're supposed to make money, but most sites don't really make all that much money with ads. Facebook and Google aren't rich from selling ads, they're rich from all of the ad infrastructure and quite frankly their ability to follow you around on the internet. Besides, how are ads on ChatGPT supposed to work? If some student is asking it to write their paper for them, is ChatGPT going to stop in the middle of it and go "Hey, you know what sounds good right now? A nice bowl of soup..." Although admittedly that would make for some hilarious proof of people using AI for things they shouldn't...
      - vlovich123 1y ago
        People regularly ask ChatGPT for product recommendations of all kinds, explicit and implicit. ChatGPT will also probably be selling ad infrastructure to inject ads just like Google injects ads into search. They probably will pay out little to websites that include the “ChatGPT” widget to integrate ChatGPT with their site that also has ads. Right now the barriers are technical for injecting ads into AI responses.
        XorNot 1y ago
        That directly tanks the entire value of AI though. As an advanced research engine, knowing it will reliably only recommend you sponsored products means it's worthless - and worse it will be primed to advocate for sponsored products. Then the whole thing becomes a scam engine, because check out what Facebook ads look like today.
        1y ago
- asah 1y ago
  WeWork was taking on long term liability commitments and paying for them with short term revenue commitments. One bad thing and poof. Everybody in the commercial real estate market saw this coming. OpenAI maybe in the same situation, committed to spending $1.4T while enjoying a good revenue year this year but then One Bad Thing and poof.
- rchaud 1y ago
  WW was able to fill those offices by charging well below market prices, because they were VC-funded so growth was more important than profitability. OpenAI is doing the same. 800m users, the vast majority of whom are free users who won't convert to paid.
  - winstonp 1y ago
    won't? i doubt that. can't tell you the last time i paid $20/mo for any non-business sub, but i've paid for some combo of openai+claude for last year

jsnell 1y ago

It's actually more like 100x their current revenue; they stated last week[0] that they have spending commitments for $1.4T of compute. Or, well, they stated that the TCO of the compute they have commitments for is $1.4T, which is a somewhat strange phrasing. I assume it's due to it being a mix of self-owned vs. rental compute, and what they mean is the TCO to OpenAI rather than the TCO to the owner of the compute. [0] https://x.com/sama/status/1983584366547829073 https://x.com/sama/status/1983584366547829073

JCM9 1y ago
That’s absolutely insane. I get that folks are now just engaged in “keeping up with the Jones’” FOMO behavior but none of this is making any sense.
- gooodvibes 1y ago
  The real massive revenues that the big tech companies are having aren't going to disappear just because OpenAI goes away.
  - DavidPiper 1y ago
    The real revenues of small and mid-sizes tech companies might, though. Which might be funny (in a Road Runner & Wile E. Coyote way) but only after considerable time and distance. Saying that, I think of those guys from The Big Short being reprimanded for celebrating their prediction of a market crash. The financial impact if the whole AI space loses even 50% of its current "valuation" will be huge. The financial impact of the whole AI space continuing at its current velocity is... More of whatever is going on now?
jcranmer 1y ago
I went to 10× revenue because I figured the ~$1 trillion was over something like a decade, rather than over a year.