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How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

nytimes.com

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Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#131

Post by delis-thumbs-7e »

simgt wrote: post #106
api wrote: post #95

Earlier quoted context omitted.

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.

As much ChatGPT says I’m basically a genius for asking it a good Vegan cake recipes, I don’t think that is providing it any data it doesn’t already have that makes it anyway better. Also at this point the massive increases in data and computing power seem to bring ever decreasing improvements (and sometimes just decline), so it seems we are simply hitting a limit this kind of architecture can achieve no matter what you throw at it.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#132

Post by parineum »

gitremote wrote: post #74
Spooky23 wrote: post #9

Earlier quoted context omitted.

It’s probably hard to do that in a news context because the real rationales are pretty tight. Depending on your POV OpenAI and the surrounding AI hype machine is at the extremes either the dawn of a new era, or a metastasized financial cancer that’s going to implode the economy. Reality lies in the middle, and nobody really knows how the story is going to end. In my personal opinion, “financial innovation” (see: the…

> Reality lies in the middle The argument to moderation/middle ground fallacy is a fallacy. https://en.wikipedia.org/wiki/Argument_to_moderation

Not really. The idea that reality lies _in_ the middle is fairly coherent. It's not, on it's face, absolutely true but there are and infinite number of options between two outcomes so the odds are overwhelmingly in the favor that the truth lies somewhere in between. Is either side totally right about every single point of contention between them? Probably not, so the answer is likely in the middle. The fallacy is a lot easier to see when you're arguing about one precise point. In that case, someone is probably right and wrong. But, in cases where a side is talking about a complex event with a multitude of data points, both extremes are likely not completely correct and the answer does, indeed, lie in between the extremes.

The fallacy is that the true lies _at_ the middle, not in the middle.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#133

Post by chermi »

bob1029 wrote: post #55
embedding-shape wrote: post #34

Earlier 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?

One person can implement a transformer model from scratch in a weekend. Hardware is not the valuable part of machine learning. Data and how it is used are. The "magic of AI" doesn't live inside an Nvidia GPU. There are billions of dollars of marketing being deployed to convince you it does. As soon as the market realizes that nvidia != magic AI box, the music should stop pretty quickly.

Umm, part of it does. It necessary but not sufficient, at least to achieve it on the timescales we've seen. Scale is part of the "magic".

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#134

Post by crazygringo »

bwfan123 wrote: post #118
crazygringo wrote: post #71

Earlier quoted context omitted.

But that has nothing to do with the arrangement of deals here. If it's a bubble, then it will pop. If it's not a bubble, then all these investments will turn out to be great. But that's a different question. The point is, all these deals happen all the time. They're not some kind of sign of a bubble. They happen just as much in non-bubbles. They're just capitalism working as usual.

These deals happen all the time. The case for a bubble is the following. When Microsoft offers cloud-credits in exchange for openai equity, what it has effectively done is to purchase its own azure revenues. ie, a company uses its own cash to purchase its own revenues. This produces an illusion of revenue growth which is not economically sustainable. This is happening for all clouds right now wherein their revenues a…

But nobody is falling for the "illusion of revenue growth". This is out in the open. This isn't a scam. Investors know this and are pricing accordingly. They see the revenue growth but also see the decrease in cash.

What Microsoft is actually doing is taking the large profits it would have otherwise made on its cloud compute with retail customers, losing much/all of those profits as it sells the compute more cheaply to OpenAI, and converting those lost profits into ownership of OpenAI because Microsoft's goal is to own more of OpenAI.

There is nothing "bubble" about this. Microsoft isn't some opaque startup investors don't understand. All of this is incredibly transparent.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#135

Post by chermi »

tehjoker wrote: post #64
bob1029 wrote: post #55

Earlier quoted context omitted.

One person can implement a transformer model from scratch in a weekend. Hardware is not the valuable part of machine learning. Data and how it is used are. The "magic of AI" doesn't live inside an Nvidia GPU. There are billions of dollars of marketing being deployed to convince you it does. As soon as the market realizes that nvidia != magic AI box, the music should stop pretty quickly.

That's true, but without the kind of horsepower provided by modern hardware, even though I'm skeptical that it's all needed, especially given DeepSeek's amazing results, AI would be nearly impossible. There are some important innovations on the algorithm / network structure side, but all these ideas are only able to be tried because the hardware supports it. This stuff has been around for decades.

Deepseek required existing models that required the horsepower.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#136

Post by kyruzic »

Hilift wrote: post #108
gregoriol wrote: post #31

Will 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.

The funds in USD were recovered because bitcoins value is 5x higher than it was when he got arrested.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#137

Post by jimbokun »

gtirloni wrote: post #22
rw3 wrote: post #6

Hank green did a vlog on this a few weeks ago and it’s a great explainer.

This one? https://www.youtube.com/watch?v=Vz0oQ0v0W10 This comment is pretty depressing but it seems to be the path we're headed to: > It's bad enough that people think fake videos are real, but they also now think real videos are fake. My channel is all wildlife that I filmed myself in my own yard, and I've had people leaving comments that it's AI, because the lighting is too pretty or the bird is too cute. The real…

There was a discussion on here recently about a new camera that could prove images taken with it weren't AI fakes, and most of the comments were skeptical anyone would care about such things.

This is an example of how people viscerally hate anyone passing off AI generated images and video as real.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#138

Post by chermi »

throwaway106382 wrote: post #26

Isn't paying a company to dig a hole who then pays you the same amount to fill said hole illegal?

Yes, but what does that have to do with this situation? The hole served no purpose. The companies are using the GPUs.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#139

Post by jimbokun »

throwaway106382 wrote: post #75
gtirloni wrote: post #22

Earlier quoted context omitted.

This one? https://www.youtube.com/watch?v=Vz0oQ0v0W10 This comment is pretty depressing but it seems to be the path we're headed to: > It's bad enough that people think fake videos are real, but they also now think real videos are fake. My channel is all wildlife that I filmed myself in my own yard, and I've had people leaving comments that it's AI, because the lighting is too pretty or the bird is too cute. The real…

We are heading to an apocalyptic level of psychosis where human beings won't even believe the things they see with their own eyes are real anymore because of being flooded with AI slop 24/7/365.

We desperately need a technological solution to be able to somehow "sign" images and videos as being real and not generated or manipulated by AI.

I have no idea how such a thing would work.

Re: How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

#140

Post by guywithahat »

nova22033 wrote: post #117

Related https://www.theregister.com/2025/10/29/microsoft_earnings_q1... Microsoft seemingly just revealed that OpenAI lost $11.5B last quarter

It's incredible how Tesla used to lose a few hundred million a year and analysis shows would freak out claiming they'd never be profitable. Now Rivian can lose 5 billion a year and I don't hear anything about it, and OpenAI can lose 11 billion in a quarter and Microsoft still backs them.

I do think this is going to be a deeply profitable industry, but this feels a little like the WeWork CEO flying couches to offices in private jets

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