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The fact that people here are looking at these numbers and saying "this is fine" is absolutely bonkers. Basically, it's a company that's not sustainable for tw
by romaniv 4mo ago
The fact that people here are looking at these numbers and saying "this is fine" is absolutely bonkers.
Basically, it's a company that's not sustainable for two separate reasons. The first one is that they have an extremely high overhead. SG&A of 55% is really bad. The seconds reason is that their R&D costs are truly astronomical. They could probably cut those costs to some extent, but they're not going to cut them to nothing. They're already losing ground to Anthropic even with this much R&D.
To put it differently, even if OpenAI cut its R&D and inference costs by half, they would still be leaking money like a sieve.
- robocat 4mo ago> SG&A = SG&A stands for Selling, General, and Administrative expenses
- ihsw 4mo ago[dead]
- CPLX 4mo agoThese companies are clearly calling things that are R&D that aren't R&D. If you're building a model that lasts a few months before it's no longer the most current one, and maybe a year before it's completely unusable by anybody, then that should just be COGS. Doing that, however, would betray the real problem with this business model.
- lokar 4mo agoCalling it capex with an appropriate depreciation schedule is more appropriate.
- Gigachad 4mo agoThey are also likely overestimating the useful lifespan of the hardware. They keep extending the number of years on the GPUs to make the accounting look better.
- BLKNSLVR 4mo agoWhen are these GPUs going to be available on the second hand market?
- Gigachad 4mo agoPresumably when the power consumption costs more than the cost of replacement. It’s not so much that these GPUs stop working after 3 years, but that newer GPUs can handle more requests with less power for the same purchase price. So the useful value of the GPU degrades until eventually it’s cheaper to replace than to keep running.
- fragmede 4mo agoStandard depreciation is 3-5 years.
- devsda 4mo agoIf the supply side constraints remains the same, I doubt they'll be releasing their GPUs as they could be considered strategic assets. Their current moat is largely hardware right. In few years open weight models may be good enough for anything but advanced usecases. With right hardware, competition may grab the lower end of market using open models. There's also potential loss of interesting training data from real conversations. I see more downsides than upsides.
- chrisgd 4mo agoThis is the venture model now though. Spend until profitable. Uber did it. It seems OpenAI could do it as well given we seem to be in a 2 horse race for foundation models and having capital to get better pushes them further ahead. Gemini is number 3 in this race
- hadlock 4mo agoBefore Uber did it, Amazon had been doing it for almost two decades. It's nothing new. There is a difference between 1 billion and 20 billion in losses, though. Amazon in, I forget, 2014? Ran a profitable quarter with I think $1 in profits, simply to prove they were in control of their finances, and "we can stop any time we want". Sam gets a lot of shade, but he's been around the YC block once or twice, I suspect whatever risk they're taking on is at least somewhat measured.
- skeeter2020 4mo agoAmazon structured their entire operation to look like this but as you indicated, could have switched to a porfit-making, dividen-paying company more than a decade ago, that just wasn't their strategy. The same can not be said for OpenAI. Even if they slashed their R&D, their marketing and sales costs are extremely high for a tech company. On paper they look more like a utility and those are not worth double-digit multiples; they compete with t-bills and GICs
- hadlock 4mo agoLooking at the fact that third parties are making a profit offering XYZ third party open models on OpenRouter, it stands to reason that OpenAI could turn off their R&D, marketing, hype jedi, legal departments and just sell GPT9.999 and turn a profit. Again like in the Amazon analogy, I don't think they're done growing, and unfortunately, I think they've positioned themselves (perhaps intentionally) as too big to fail, and need to continue growth at all costs. I'm glad I'm not OAI's CFO sounds like a stressful job trying to justify/account for whatever Sam says to the board, or whatever the board demands. Sam hasn't said hardly anything since about February so I'm guessing the CFO simply bends to the will of the board these days. But that's speculation.
- wg0 4mo agoYeah insane that people think it'll be okay in the long run but wondering how much different the financial status of other such company would be? Not much I guess.
- jcgrillo 4mo agoI can't imagine there's a large variation in costs per token for inference and training costs between companies, and since they're all basically doing exactly the same thing, and competing on price... yeah.
- joshuastuden 4mo agoThey're not really losing ground to Anthropic. 5.5 was a bit better than 4.8. Fable was good, and was a jump over 4.8, but only incremental over 5.5. Anthropic is also likely losing money, right?
- firesteelrain 4mo agoI never get throttled by Codex at $20/mo however Claude throttles faster at same rate. I like Claude’s output in terms of code however
- overfeed 4mo agoIn other words, Codex likely has a lower demand:capacity ratio compared to Claude. Which can mean either OpenAI did a better job at building out capacity, or the demand for Claude outstripped Anthropic's projections. Or both.
- rohansood15 4mo agoOr Codex models are more efficient that Claude. Plus the two things you mentioned.
- mbreese 4mo agoOr Claude is better at getting people to move to more expensive membership tiers. From reading here, it seems like Claude still has a lot of users. If Claude has lower limits for their $20 plan, it stands to reason that people are paying for more expensive plans to get similar levels of usage. This assumes they aren’t reducing demand through the throttling, which is a big assumption. I’d love to know what Anthropic’s comparable numbers look like.
- anuramat 4mo agohuh, I felt like (gpt5.5 < opus4.8 << fable) in terms of code quality, and (g ~= o < f) in terms of pure pass rate; which one did you mean? curious about your typical workflow/tasks I want to like gpt5.5 but it's like an evil genie: bugs are fixed, features are implemented, you are now a proud owner of a 2kloc file with a single function that makes you wish you had keybindings for horizontal scrolling
- nojito 4mo agoYou're over inflating the S which is expected to increase as now they are "going to market" G&A is within expectations. Revenue is still growing faster than costs and gross margins have continued to improve. The real question is when they can start spending less on R&D and still compete.
- airstrike 4mo ago> The real question is when they can start spending less on R&D and still compete. As a company making SOTA models? Never.
- anjel 4mo agoNot here to entirely disagree its bonkers, but Tesla lost about 6b until 2022 when it got profitable and has since returned a healthy multiple of its prior losses as profits.
- winfredJa 4mo agoTesla didn't have any real competition until recently from chinese side. 2nd OpenAI is a software company unlike Tesla
- emodendroket 4mo agoAmazon and Uber are other examples of businesses that looked like total basket cases for years. I remember reading, and at the time being persuaded by, articles arguing that Uber was doomed because there are no real economies of scale in livery services, and so the minute they began to achieve a dominant position and hike prices, countless competitors would easily swoop in and undercut them. Didn't turn out that way.
- anjel 4mo agoProfits are irreducibly profitable, regardless.
- y1n0 4mo agoTesla's losses were always a small fraction of annual revenue. OpenAI loses multiples of annual revenue.
- fnord77 4mo ago> They're already losing ground to Anthropic even with this much R&D. Do we know how bad/good misAnthropic is doing financially?
- ViscountPenguin 4mo agoPetitioning the corrupt head of state to force Anthropic out of business seems to be part of the business model.