They are fueling rich family office money into the bank accounts of their personell. Not bad not bad.
How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
81–90 of 428 posts
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#82Here is a charitable perspective on what's happening: - Nvidia has too much cash because of massive profits and has nowhere to reinvest them internally. - Nvidia instead invests in other companies that use their gpus by providing them deals that must be spent on nvidia products. - This accelerates the growth of these companies, drives further lock in to nvidia's platform, and gives nvidia an equity stake in these com…
> Everything seems to indicate that once the models are trained, they are extremely profitable Some data would reinforce your case. Do you have it? Here is my data point: "You Have No Idea How Screwed OpenAI Actually Is" - https://wlockett.medium.com/you-have-no-idea-how-screwed-ope...
Inference cost has been going down for a while now. At what point do you think it will be profitable? When cost goes down by 2x? 5x?
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#83Here is a charitable perspective on what's happening: - Nvidia has too much cash because of massive profits and has nowhere to reinvest them internally. - Nvidia instead invests in other companies that use their gpus by providing them deals that must be spent on nvidia products. - This accelerates the growth of these companies, drives further lock in to nvidia's platform, and gives nvidia an equity stake in these com…
> Everything seems to indicate that once the models are trained, they are extremely profitable Some data would reinforce your case. Do you have it? Here is my data point: "You Have No Idea How Screwed OpenAI Actually Is" - https://wlockett.medium.com/you-have-no-idea-how-screwed-ope...
This is behind a paywall. Is there a free link you can share ?
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#84These kinds of deals were very much a la mode just prior to the .com crash. Companies would buy advertising, then the websites and ad agencies would buy their services and they'd spend it again on advertising. The end result is immense revenues without profits.
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 anot…
>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.
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#85Okay, that article is a little bit shallow. I just summarises the headlines of the last weeks of circular deals. But is there also a more in depth article that sheds a little more light onto what this actually means? From a financial perspective?
Ed Zitron has been shouting into the void about this for quite some time: https://www.wheresyoured.at/the-case-against-generative-ai/ He also has a podcast called Better Offline, which is slightly too ad heavy for my taste. Nevertheless, with my meagre understanding of the large corporate finances I was not able to find any errors in his core argument regardless of his somewhat sensationalist style of writing.
My complaint about Ed Zitron is that he's _always_ shouting into the void about something. A lot of the issues he covers are legitimate and deserve the scorn he gives them but at some point it became hard for me to sort the signal from the noise.
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#86Earlier quoted context omitted.
Why is ML knowledge "in the engineers" while chip manufacturing apparently sits in the company/hardware/something else than the engineers/humans?
Read up a bit on the effort needed to get a fab going, and the yield rates. While engineers are crucial in the setup, the fab itself is not as 'fungible' as the employees involved. I can spin up a strong ML team through hiring in probably 6-12 months with the right funding. Building a chip fab and getting it to a sensible yield would take 3-5 years, significantly more funding, strong supply lines, etc.
Right. I could spin up a strong ML team, an AI startup, build a foundational model, etc give a reasonable amount of seed capital.
Build a chip fab? I’ve got no idea where to start, where to even find people to hire, and i know the equipment we’d need to acquire would be also quite difficult to get at any price.
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#87Here is a charitable perspective on what's happening: - Nvidia has too much cash because of massive profits and has nowhere to reinvest them internally. - Nvidia instead invests in other companies that use their gpus by providing them deals that must be spent on nvidia products. - This accelerates the growth of these companies, drives further lock in to nvidia's platform, and gives nvidia an equity stake in these com…
Yup. Not just Nvidia. Just look at the quarterly results reported by Amazon, Google, Meta, Microsoft and Apple. Each one is reporting revenues never before seen in history. If you make 100 Billion a quarter you have to spend it on something. These guys are running hyper optimized cash extraction mega machines. There is no comparison to previous bubbles, cause so no such companies ever existed in the past.
100 billion a quarter is Alphabet, right? Given how much click fraud there is, and that every org and business under the sun is held to ransom to feature on the SERP for their own name even — it’s tempting to say Google’s become a private tax on everything.
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#88Given that AI is a national security matter now, I'd expect the U.S.A to step in and rescue certain companies in the event of a crash. However, I'd give higher chances to NVIDIA than OpenAI. Weights are easily transferrable and the expertise is in the engineers, but ability to continue making advanced chips is not as easily transferred.
Why is ML knowledge "in the engineers" while chip manufacturing apparently sits in the company/hardware/something else than the engineers/humans?
Chip manufacturing is extremely time consuming, especially when we are talking about masks for lithography.
The rights on masks for chips and their parts (IPs) belong to companies.
And one definitely does not want these masks to be sold during bankruptcy process to (arbitrary) higher bidders.
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#89Isn't paying a company to dig a hole who then pays you the same amount to fill said hole illegal?
Not if it increases the GDP.
Well, I've got great news then 92% of GDP growth in the first half of 2025 was hole filling companies paying hole digging companies to dig holes and in-kind pay them to fill them up again
what could possibly go wrong
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#90Earlier quoted context omitted.
Why is ML knowledge "in the engineers" while chip manufacturing apparently sits in the company/hardware/something else than the engineers/humans?
Read up a bit on the effort needed to get a fab going, and the yield rates. While engineers are crucial in the setup, the fab itself is not as 'fungible' as the employees involved. I can spin up a strong ML team through hiring in probably 6-12 months with the right funding. Building a chip fab and getting it to a sensible yield would take 3-5 years, significantly more funding, strong supply lines, etc.
> I can spin up a strong ML team through hiring in probably 6-12 months with the right funding.
Mark Zuckerberg would like a word with you