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How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
101–110 of 428 posts
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#102Earlier quoted context omitted.
> 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...
Right. As far as I can tell, OpenAI, Grok, etc sell me tokens at a loss. But I am having a hard time figuring out how to turn tokens into money (i.e. increased productivity). I can justify $40-$200 per developer per month on tokens but not more than that.
why would they sell you at a loss when they have been decreasing prices by 2x every year or so for the last 3 years? people wanted to purchase the product at price "X" in 2023 and now the same product costs X costs 10 times less over the years.. do you think they were always selling at a loss?
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#103Many here now didn't live through the dot-com bubble as an adult so can't really appreciate what it was like. The hype was something hard to describe. Financial analysts and journalists struggled to come up with ways to describe the health of these "companies". My favorite was what revenue multiple companies would trade it.
But the major takeaway was that almost none of these companies were real businesses. This is why I laughed at dot-com comparisons in the 2010s around the tech giants because Apple, Google, Microsoft, etc were money-printing machines on a scale we have trouble comprehending. That doesn't make them immune to economic struggles. Ad spending with Google will rise and fall with the economy.
OpenAI has a paper valuation in the hundreds of billions of dollars now and no prospect of a revenue model that will justify that for many, many years.
Currently, the hardware is a barrier to entry but that won't last. It has parallels in the dot-com era too when servers were expensive. The cost of training LLMs is (at least) halving every year. We're probably reaching the limits of what these transformers can do and we'll need another big breakthrough to improve.
OpenAI's moat is tenuous. Their value is in the model they don't release. But DeepSeek is a warning shot that it will be in somebody's geopolitical interest, probably China's, to prevent a US tech monopoly on AI.
If you look at these AI companies, so many of them are basically scams. I saw a video about a household humanoid robot that was, surprise surprise, just someone in a VR suit. Many cities have delivery drones now but somebody is remotely driving them.
I saw somebody float the theory that the super-profitable big tech companies are engaging in layoffs not because they don't need people but to pay for the GPUs. It's an interesting idea. A lot of these NVidia deals are just moving money around where NVidia comes out on top with a bunch of equity in these companies should they become trillion dollar companies.
Oh and take out data center building from the US economy and we're in recession. I do think this is a bubble and it will burst sooner rather than later.
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#104Earlier quoted context omitted.
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.
Odd how they are simultaneously having large layoffs even as reporting record revenues. The question is where the profits are.
Amazon - 14,000 layoffs; significant
Microsoft - 14,000 (multiple rounds); significant
Meta - 600 layoffs; insignificant for company size
Google - "Several hundred layoffs"; insignificant for a company size
Apple - No layoffs
Source: https://techcrunch.com/2025/10/24/tech-layoffs-2025-list/
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#105Earlier quoted context omitted.
> 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 ?
Would love to, and its normally what I do, but archive.is is currently down. At least here from the outer belt.
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#106Earlier quoted context omitted.
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…
The assumption is that they have a large moat. If they don't then they're spending a ton of money to level up models and tech now, but others will eventually catch up and their margins will vanish. This will be true if (as I believe) AI will plateau as we run out of training data. As this happens, CPU process improvements and increased competition in the AI chip / GPU space will make it progressively cheaper to train…
> This will be true if (as I believe) AI will plateau as we run out of training data.
Why would they run out of training data? They needed external data to bootstrap, now it's going directly to them through chatgpt or codex.
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#107Earlier quoted context omitted.
> 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...
Right. As far as I can tell, OpenAI, Grok, etc sell me tokens at a loss. But I am having a hard time figuring out how to turn tokens into money (i.e. increased productivity). I can justify $40-$200 per developer per month on tokens but not more than that.
There’s about 5M software devs in the US so even at $1000/year/person spend, that’s only $5B of revenue to go around. Theres plenty of other uses cases but focusing on pure tech usage, it’s hard to see how the net present value of that equates to multiple trillions of dollars across the ecosystem.
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#108Will Sam Altman's fall be as legendary as Sam Bankman-Fried's?
Most of the funds lost to SBF were recovered. And CPZ has a pardon. Crypto has evaporated about $2 trillion in assets since then.
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#109Here 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.
So many such profitable companies are the best possible evidence for the need for drastic antitrust intervention. The lack of competition and regulation is leading to a massive drain on every other sector.
Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise
#110Given 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.
Even if/when the bubble pops, I don't think NVIDIA is even close to need rescuing or being in trouble. They might end being worth 2 trillion instead of 5 but they're still selling GPUs nobody else knows how to make that power one of the most important technologies in the world. Also, all their other divisions.
The .com bubble didn't stop the internet or e-commerce, they still won, revolutioned everything, etc. etc. Just because there's a bubble it doesn't mean AI won't be successful. It will be, almost for sure. We've all used it, it's truly useful and transformative. Let's not miss the forest for the trees.