5 ms·
This agreement feels so friendly towards OpenAI that it's not obvious to me why Microsoft accepted this. I guess Microsoft just realized that the previous agree
by _jab 5mo ago
This agreement feels so friendly towards OpenAI that it's not obvious to me why Microsoft accepted this. I guess Microsoft just realized that the previous agreement was kneecapping OpenAI so much that the investment was at risk, especially with serious competition now coming from Anthropic?
- guluarte 5mo agoI think MS wants OpenAI to fail so it can absorb it
- Oras 5mo agoMS put 10B for 50% if I remember correctly. OpenAI is worth many multiples of that.
- bmitc 5mo ago> OpenAI is worth many multiples of that. How?
- senordevnyc 5mo agoBecause they recently issued shares at a price many multiples of that, and people bought them. How else would you define financial worth?
- andriy_koval 5mo agoI would use your number adjusted by some demand elasticity curve.
- tanseydavid 5mo agoThe "back-of-the-napkin" only has enough room to estimate based on recently issued share price. Seems reasonable to me.
- andriy_koval 5mo agoSure, for napkin level math you can go with this, and multiply by some simple multiplier, I like 70%.
- bmitc 5mo agoDoes speculation equal worth?
- marricks 5mo ago> OpenAI is worth many multiples of that valued at --which I'd say is a reasonable distinction to make right about now
- Oras 5mo agoTheir revenue is 20B, so they still worth multiples of 10B regardless of valuation even if you consider the basic 5x revenue valuation https://www.reuters.com/business/openai-cfo-says-annualized-revenue-crosses-20-billion-2025-2026-01-19/ https://www.reuters.com/business/openai-cfo-says-annualized-...
- Dylan16807 5mo ago"The basic 5x revenue valuation" doesn't work for businesses that aren't profitable.
- nimchimpsky 5mo ago[dead]
- 3eb7988a1663 5mo agoIt is also unclear to me how much real debt they carry. They have famously been signing many deals: RAM, datacenters, maybe nuclear power plants -I no longer know what is a joke or not. They must be carrying hundreds of billions in paper debt obligations, which is tough to payback at $20B revenue.
- sethops1 5mo agoI'm giddy about reading their S1 in the near future. We're about to have another "We What the Fuck" moment.
- cheema33 5mo ago> Their revenue is 20B, so they still worth multiples of 10B regardless of valuation... I can easily generate double that revenue, by selling $20 bills for $10.
- HWR_14 5mo agoWhen they put 10B in, they got weird tiered revenue shares and other rights. That has been simplified to 27% of OpenAI today. I don't know what that meant their 10B would be worth before dilution in later rounds.
- dinosor 5mo ago> Microsoft will no longer pay a revenue share to OpenAI. I feel this looks like a nice thing to have given they remain the primary cloud provider. If Azure improves it's overall quality then I don't see why this ends up as a money printing press as long as OpenAI brings good models?
- JumpCrisscross 5mo agoOpenAI was also threatening to accuse "Microsoft of anticompetitive behavior during their partnership," an "effort [which] could involve seeking federal regulatory review of the terms of the contract for potential violations of antitrust law, as well as a public campaign" [1]. [1] https://www.wsj.com/tech/ai/openai-and-microsoft-tensions-are-reaching-a-boiling-point-4981c44f?mod=article_inline https://www.wsj.com/tech/ai/openai-and-microsoft-tensions-ar...
- someguyiguess 5mo agoPot? Meet Kettle.
- aurareturn 5mo agoDoes this mean Microsoft gets OpenAI's models for "free" without having to pay them a dime until 2032? And on top of that, OpenAI still has to pay Microsoft a share of their revenue made on AWS/Google/anywhere until 2030? And Microsoft owns 27% of OpenAI, period? That's a damn good deal for Microsoft. Likely the investment that will keep Microsoft's stock relevant for years.
- dzonga 5mo agoown 27%. but are entitled to OpenAI profits of 49% for eternity (if OpenAI is profitable or government steps in)
- aurareturn 5mo agoown 27%. but are entitled to OpenAI profits of 49% for eternity (if OpenAI is profitable or government steps in) Where is the 49% coming from? The new deal does not talk about that.
- dkrich 5mo agoProbably more that they are compute constrained. In his latest post Ben Thompson talks about how Microsoft had to use their own infrastructure and supplant outside users in the process so this is probably to free up compute.
- Rapzid 5mo agoI think it's this. They sell a crap ton of b2b inference through Azure and I'm sure this competes with resources needed for training.
- DanielHB 5mo agoMicrosoft is a major shareholder of OpenAI, they don't want their investment to go to 0. You don't just take a loss on a multiple-digit billion investment.
- snowwrestler 5mo agoI think you’re right about this deal. But it’s kind of funny to think back and realize that Microsoft actually has just written off multi-billion-dollar deals, several times in fact.
- nacozarina 5mo agoOne (1) year after M$ bought Nokia they wrote it off for $7.6 Billion. There’s no upper limit to their financial stupidity.
- snek_case 5mo agoThe metaverse is another example if anyone doubts the bounds of corporate stupidity.
- lesuorac 5mo agoWhy? FaceBook largely requires an Apple iPhone, Apple computer, "Microsoft" computer, "Google" phone, or a "Google" computer to use it. At any point one of those companies could cut FaceBook off (ex. [1]). The Metaverse was a long term goal to get people onto a device (Occulus) that Meta controlled. While I think an AR device is much more useful than VR; I'm not convinced that it's a mistake for Meta to peruse not being beholden to other platforms. [1]: https://arstechnica.com/gadgets/2019/01/facebook-and-google-offered-gift-cards-for-root-level-access-to-ios-users-data/ https://arstechnica.com/gadgets/2019/01/facebook-and-google-...
- IshKebab 5mo agoBecause it's been very clear for a long time that the vast majority of people do not want to play VR Second Life.
- HWR_14 5mo agoThis is probably a delayed outgrowth of the negotiations last year, where Microsoft started trading weird revenue shares and exclusivity for 27% of the company.
- deleted 5mo ago[deleted]
- p_stuart82 5mo ago$250b committed to azure helps. especially when some of that is your own investment coming back.
- oh_no 5mo ago1- Getting OpenAI's models in Azure with no license fee is pretty nice. 2- Microsoft owns ~15-27% of OpenAI, if the agreement was hurting OpenAI more than it was helping Microsoft, seems reasonable to change the terms.
- david_shi 5mo agoWhat aspects of the deal do you think kneecapped OpenAI the most?
- az226 5mo agoOpenAI found a way to circumvent the exclusivity. The deal was poorly defined by Microsoft. OpenAI had started selling a service on AWS that had a stateful component to it, not purely an API. Obviously Microsoft didn’t like that and confronted Altman, and this is the settlement of that confrontation, OpenAI doesn’t need to do workarounds, Microsoft won’t sue to enforce exclusivity, and Microsoft doesn’t have to pay dev share to OpenAI. AWS is a much bigger market so OpenAI doesn’t care.