7 ms·

Nadella had OpenAI by the short and curlies early on. But all I've seen from him in the last couple of years is continuously acquiescing to OpenAI's demands. I

Nadella had OpenAI by the short and curlies early on. But all I've seen from him in the last couple of years is continuously acquiescing to OpenAI's demands. I wonder why he's so weak and doesn't exert more control over the situation? At one point Microsoft owned 49% of OpenAI but now it's down to 27%?

PunchyHamster 6mo ago
Why would they acquire more when company is still not making profit ? To be left with bigger bag ?
dijit 6mo ago
Everything is personal preference, and perhaps I am more fiscally conservative because I grew up in poverty. But if I own 49% of a company and that company has more hype than product, hasn't found its market yet but is valued at trillions? I'm going to sell percentages of that to build my war chest for things that actually hit my bottom line. The "moonshot" has for all intents and purposes been achieved based on the valuation, and at that valuation: OpenAI has to completely crush all competition... basically just to meet its current valuations. It would be a really fiscally irresponsible move not to hedge your bets. Not that it matters but we did something similar with the donated bitcoin on my project. When bitcoin hit a "new record high" we sold half. Then held the remainder until it hit a "new record high" again. Sure, we could have 'maxxed profit!'; but ultimately it did its job, it was an effective donation/investment that had reasonably maximal returns. (that said, I do not believe in crypto as an investment opportunity, it's merely the hand I was dealt by it being donated).
- freediddy 6mo ago
  Microsoft didn't sell anything. OpenAI created more shares and sold those to investors, so Microsoft's stake is getting diluted. And Microsoft only paid $10B for that stake for the most recognizable name brand for AI around the world. They don't need to "hedge their bets" it's already a humongous win. Why let Altman continue to call the shots and decrease Microsoft's ownership stake and ability to dictate how OpenAI helps Microsoft and not the other way around?
  - tonyedgecombe 6mo ago
    About the same as they wasted on Nokia.
  - zozbot234 6mo ago
    > They don't need to "hedge their bets" it's already a humongous win. That's a flawed argument. Why wouldn't you want to hedge a risky bet, and one that's even quite highly correlated to Microsoft's own industry sector?
  - theplatman 6mo ago
    do we know whether Microsoft could have been selling secondary shares as part of various funding rounds? my impression is that many of these "investments" are structured IOUs for circular deals based on compute resources in exchange for LLM usage
  - cruffle_duffle 6mo ago
    I think people are looking for excuses to declare OpenAI and Anthropic teetering on the brink of failure when the actual reality is… they are wildly successful by absolutely any measure. This deal is proof. If Microsoft didn’t believe in OpenAI they wouldn’t have restructured it this way. They’d have tightened their reins and brought in “adult supervision”
    - cheema33 6mo ago
      > I think people are looking for excuses to declare OpenAI and Anthropic teetering on the brink of failure when the actual reality is… they are wildly successful by absolutely any measure. Maybe that will be true someday. But, right now, they are burning billions of dollars every quarter. Their expenses far far outweigh their income and they are nowhere near profitability.
      - noobermin 6mo ago
        silly valley stopped letting the subtraction of two numbers dictate their reality since the start-up era. while the money and vcs stopped trying to finding the next uber and went all in on llms, they didn't get wiser in how they gauge if something is worth investing in
- solumunus 6mo ago
  They haven’t sold anything they’ve been diluted.
  - hirako2000 6mo ago
    A company can dilute just like that?
    - whatever1 6mo ago
      Of course. Public companies do this too. Where do you think the stocks awards that they give to employees come from? They come from just printing more shares every quarter, diluting every shareholder.
      - hirako2000 6mo ago
        I was told stock to employees are left aside shares, or they sell the stock the company owns if they already went public. I'm not convinced what you believe is true. Dilution is possible undoubtedly, but perhaps if majority shareholders approve it. And even then, likely regulated by a suite or other constraints.
        whatever1 6mo ago
        Yep every quarter the Board has to approve it. Check the financial statement of AMZN for example.
- saaaaaam 6mo ago
  I don’t understand the “record high” point. How did you decide when a “record high” had been reached in a volatile market? Because at $1 the record high might be $2 until it reaches $3 a week or month later. How did you determine where to slice on “record highs”? Genuine question because I feel like I’m maybe missing something!
  - dijit 6mo ago
    The short answer is: it's the secretary problem. The longer answer is; you never know whats coming next, bitcoin could have doubled the day after, and doubled the day after that, and so on, for weeks. And by selling half you've effectively sacrificed huge sums of money. The truth is that by retaining half you have minimised potential losses and sacrificed potential gains, you've chosen a middle position which is more stable. So, if bitcoin 1000 bitcoing which was word $5 one day, and $7 the next, but suddenly it hits $30. Well, we'd sell half. If the day after it hit $60, then our 500 remaining bitcoins is worth the same as what we sold, so in theory all we lost was potential gains, we didn't lose any actual value. Of course, we wouldn't sell we'd hold, and it would probably fall down to $15 or something instead.. then the cycle begins again..
- senordevnyc 6mo ago
  It’s not more hype than product, it has found a market (making many billions in revenue), and it’s not valued at trillions. So wrong on all counts.
  - dijit 6mo ago
    > It’s not more hype than product, it has found a market (making many billions in revenue) Speculation based on selling at below cost. > it’s not valued at trillions Fair, it's only $852 billion. Nowhere near trillions.. you got me.
    - senordevnyc 6mo ago
      Inference is quite profitable, so wrong again.
      - dijit 6mo ago
        Right. Going to take "inference is quite profitable" apart, because there's nothing else in your reply. OpenAI's adjusted gross margin: 40% in 2024, 33% in 2025. Reason cited: inference costs quadrupled in one year. https://sacra.com/c/openai/ https://sacra.com/c/openai/ Internal projections leaked to The Information: ~$14B loss on ~$13B revenue in 2026. Cumulative losses through 2028: ~$44B. https://finance.yahoo.com/news/openais-own-forecast-predicts-14-150445813.html https://finance.yahoo.com/news/openais-own-forecast-predicts... A business burning more than a dollar for every dollar of revenue is a lot of things. "Quite profitable" is not one of them. If you're reaching for the SaaStr piece on API compute margins hitting ~70% by late 2025: yes, that exists, and it describes one tier. The volume is on the consumer side. The consumer side is the bit on fire. Pointing at the API margin and calling the whole business profitable is the financial equivalent of weighing yourself with one foot off the scale. The original argument, in case it got lost: Microsoft holds (held) a 49% stake in a company projecting another $44B of cumulative losses through 2028, against unit economics that depend on competitors not catching up. That's textbook hedge-the-bet territory. "They have paying customers" doesn't refute that, MoviePass had paying customers too.
- GardenLetter27 6mo ago
  It's not hype, the demand for inference has grown more this year than expected.
  - dijit 6mo ago
    If I buy oranges for $1 and sell them for $0.50 and I sell a lot of oranges, can I reasonably say that I've found a market? Hrm..
    - inquirerGeneral 6mo ago
      [dead]
    - signatoremo 6mo ago
      Were you around here ten years ago when that exact argument was regularly regurgitated about Uber? Notice that argument is no longer popular? The point is that losing money isn't a sure sign that a business is doomed. Who knows where OpenAI will end up, but people still line up to invest. Those investors have billions reasons to be due diligent. Unlike what's claimed around here, most of investors aren't stupid. You yourself wouldn't be stupid either if money is at stake.
      - Xunjin 6mo ago
        Not saying you are wrong, but let's not forget the famous crashes of 1929, .com, and 2008 bubbles.
tyre 6mo ago
They had to negotiate away the non-profit structure of OpenAI. Sam used that as a marketing and recruiting tool, but it had outlived that and was only a problem from then on. For OAI to be a purely capitalist venture, they had to rip that out. But since the non-profit owned control of the company, it had to get something for giving up those rights. This led to a huge negotiation and MSFT ended up with 27% of a company that doesn’t get kneecapped by an ethical board. In reality, though, the board of both the non-profit and the for profit are nearly identical and beholden to Sam, post–failed coup.
gessha 6mo ago
If Sam continues doing Sam things, MS might get 0% of OpenAI if Satya insists on the previous contract. Either by closing up OpenAI and opening up OpaenAI and/or by MS suing it out of existence. It’s all about what MS can get out of it. If they can get 27% of something rather than nothing, they’re better off.
kirubakaran 6mo ago
> Nadella had OpenAI by the short and curlies early on Looks like Nadella is slowly realizing that it is his short and curlies that are in the vice grip in the "If you owe the bank $100 vs $100M" sense?

PunchyHamster 6mo ago

Why would they acquire more when company is still not making profit ? To be left with bigger bag ?

dijit 6mo ago

Everything is personal preference, and perhaps I am more fiscally conservative because I grew up in poverty. But if I own 49% of a company and that company has more hype than product, hasn't found its market yet but is valued at trillions? I'm going to sell percentages of that to build my war chest for things that actually hit my bottom line. The "moonshot" has for all intents and purposes been achieved based on the valuation, and at that valuation: OpenAI has to completely crush all competition... basically just to meet its current valuations. It would be a really fiscally irresponsible move not to hedge your bets. Not that it matters but we did something similar with the donated bitcoin on my project. When bitcoin hit a "new record high" we sold half. Then held the remainder until it hit a "new record high" again. Sure, we could have 'maxxed profit!'; but ultimately it did its job, it was an effective donation/investment that had reasonably maximal returns. (that said, I do not believe in crypto as an investment opportunity, it's merely the hand I was dealt by it being donated).

freediddy 6mo ago
Microsoft didn't sell anything. OpenAI created more shares and sold those to investors, so Microsoft's stake is getting diluted. And Microsoft only paid $10B for that stake for the most recognizable name brand for AI around the world. They don't need to "hedge their bets" it's already a humongous win. Why let Altman continue to call the shots and decrease Microsoft's ownership stake and ability to dictate how OpenAI helps Microsoft and not the other way around?
- tonyedgecombe 6mo ago
  About the same as they wasted on Nokia.
- zozbot234 6mo ago
  > They don't need to "hedge their bets" it's already a humongous win. That's a flawed argument. Why wouldn't you want to hedge a risky bet, and one that's even quite highly correlated to Microsoft's own industry sector?
- theplatman 6mo ago
  do we know whether Microsoft could have been selling secondary shares as part of various funding rounds? my impression is that many of these "investments" are structured IOUs for circular deals based on compute resources in exchange for LLM usage
- cruffle_duffle 6mo ago
  I think people are looking for excuses to declare OpenAI and Anthropic teetering on the brink of failure when the actual reality is… they are wildly successful by absolutely any measure. This deal is proof. If Microsoft didn’t believe in OpenAI they wouldn’t have restructured it this way. They’d have tightened their reins and brought in “adult supervision”
  - cheema33 6mo ago
    > I think people are looking for excuses to declare OpenAI and Anthropic teetering on the brink of failure when the actual reality is… they are wildly successful by absolutely any measure. Maybe that will be true someday. But, right now, they are burning billions of dollars every quarter. Their expenses far far outweigh their income and they are nowhere near profitability.
    - noobermin 6mo ago
      silly valley stopped letting the subtraction of two numbers dictate their reality since the start-up era. while the money and vcs stopped trying to finding the next uber and went all in on llms, they didn't get wiser in how they gauge if something is worth investing in
solumunus 6mo ago
They haven’t sold anything they’ve been diluted.
- hirako2000 6mo ago
  A company can dilute just like that?
  - whatever1 6mo ago
    Of course. Public companies do this too. Where do you think the stocks awards that they give to employees come from? They come from just printing more shares every quarter, diluting every shareholder.
    - hirako2000 6mo ago
      I was told stock to employees are left aside shares, or they sell the stock the company owns if they already went public. I'm not convinced what you believe is true. Dilution is possible undoubtedly, but perhaps if majority shareholders approve it. And even then, likely regulated by a suite or other constraints.
      - whatever1 6mo ago
        Yep every quarter the Board has to approve it. Check the financial statement of AMZN for example.
saaaaaam 6mo ago
I don’t understand the “record high” point. How did you decide when a “record high” had been reached in a volatile market? Because at $1 the record high might be $2 until it reaches $3 a week or month later. How did you determine where to slice on “record highs”? Genuine question because I feel like I’m maybe missing something!
- dijit 6mo ago
  The short answer is: it's the secretary problem. The longer answer is; you never know whats coming next, bitcoin could have doubled the day after, and doubled the day after that, and so on, for weeks. And by selling half you've effectively sacrificed huge sums of money. The truth is that by retaining half you have minimised potential losses and sacrificed potential gains, you've chosen a middle position which is more stable. So, if bitcoin 1000 bitcoing which was word $5 one day, and $7 the next, but suddenly it hits $30. Well, we'd sell half. If the day after it hit $60, then our 500 remaining bitcoins is worth the same as what we sold, so in theory all we lost was potential gains, we didn't lose any actual value. Of course, we wouldn't sell we'd hold, and it would probably fall down to $15 or something instead.. then the cycle begins again..
senordevnyc 6mo ago
It’s not more hype than product, it has found a market (making many billions in revenue), and it’s not valued at trillions. So wrong on all counts.
- dijit 6mo ago
  > It’s not more hype than product, it has found a market (making many billions in revenue) Speculation based on selling at below cost. > it’s not valued at trillions Fair, it's only $852 billion. Nowhere near trillions.. you got me.
  - senordevnyc 6mo ago
    Inference is quite profitable, so wrong again.
    - dijit 6mo ago
      Right. Going to take "inference is quite profitable" apart, because there's nothing else in your reply. OpenAI's adjusted gross margin: 40% in 2024, 33% in 2025. Reason cited: inference costs quadrupled in one year. https://sacra.com/c/openai/ https://sacra.com/c/openai/ Internal projections leaked to The Information: ~$14B loss on ~$13B revenue in 2026. Cumulative losses through 2028: ~$44B. https://finance.yahoo.com/news/openais-own-forecast-predicts-14-150445813.html https://finance.yahoo.com/news/openais-own-forecast-predicts... A business burning more than a dollar for every dollar of revenue is a lot of things. "Quite profitable" is not one of them. If you're reaching for the SaaStr piece on API compute margins hitting ~70% by late 2025: yes, that exists, and it describes one tier. The volume is on the consumer side. The consumer side is the bit on fire. Pointing at the API margin and calling the whole business profitable is the financial equivalent of weighing yourself with one foot off the scale. The original argument, in case it got lost: Microsoft holds (held) a 49% stake in a company projecting another $44B of cumulative losses through 2028, against unit economics that depend on competitors not catching up. That's textbook hedge-the-bet territory. "They have paying customers" doesn't refute that, MoviePass had paying customers too.
GardenLetter27 6mo ago
It's not hype, the demand for inference has grown more this year than expected.
- dijit 6mo ago
  If I buy oranges for $1 and sell them for $0.50 and I sell a lot of oranges, can I reasonably say that I've found a market? Hrm..
  - inquirerGeneral 6mo ago
    [dead]
  - signatoremo 6mo ago
    Were you around here ten years ago when that exact argument was regularly regurgitated about Uber? Notice that argument is no longer popular? The point is that losing money isn't a sure sign that a business is doomed. Who knows where OpenAI will end up, but people still line up to invest. Those investors have billions reasons to be due diligent. Unlike what's claimed around here, most of investors aren't stupid. You yourself wouldn't be stupid either if money is at stake.
    - Xunjin 6mo ago
      Not saying you are wrong, but let's not forget the famous crashes of 1929, .com, and 2008 bubbles.

tyre 6mo ago

They had to negotiate away the non-profit structure of OpenAI. Sam used that as a marketing and recruiting tool, but it had outlived that and was only a problem from then on. For OAI to be a purely capitalist venture, they had to rip that out. But since the non-profit owned control of the company, it had to get something for giving up those rights. This led to a huge negotiation and MSFT ended up with 27% of a company that doesn’t get kneecapped by an ethical board. In reality, though, the board of both the non-profit and the for profit are nearly identical and beholden to Sam, post–failed coup.

gessha 6mo ago

If Sam continues doing Sam things, MS might get 0% of OpenAI if Satya insists on the previous contract. Either by closing up OpenAI and opening up OpaenAI and/or by MS suing it out of existence. It’s all about what MS can get out of it. If they can get 27% of something rather than nothing, they’re better off.

kirubakaran 6mo ago

> Nadella had OpenAI by the short and curlies early on Looks like Nadella is slowly realizing that it is his short and curlies that are in the vice grip in the "If you owe the bank $100 vs $100M" sense?