OpenAI completes deal that values company at $157B • Hacker News Board

Re: OpenAI completes deal that values company at $157B

#191

Post by tptacek » Wed, Oct 02, 2024, 10:38 PM UTC

azinman2 wrote: post #171

tptacek wrote: post #158

Earlier quoted context omitted.

You don't need science fiction to find the bull case for OpenAI. You just have to think it stands to be the "next" Google, which feels increasingly plausible. Google's current market capitalization is in the trillions.

In 2023 Google had $307.39B in revenue and $24B in profit last quarter (suggesting ~100B in profit this year). Meanwhile OpenAI is losing money and making no where near these sums.

Facebook got all the way to an IPO with business fundamentals so bad that after the IPO, Paul Graham wrote a letter to all the then-current YC companies warning them that the Facebook stink was going to foul the whole VC market in the following years. Meta is now worth something like 1.4T.

Re: OpenAI completes deal that values company at $157B

#192

Post by adastra22 » Wed, Oct 02, 2024, 10:38 PM UTC

seper8 wrote: post #149

threwaway4392 wrote: post #134

They haven't even started their own versions of AdWords. Google's money printing is based on people telling Google what they want in the search bar, and google placing ads about what they want right when they ask for it. Today people type what they want in the ChatGPT search bar.

Difference is is that I can just switch to another LLM. I cant really do the same for Google.

There are other search engines…

I haven’t used google in years.

Re: OpenAI completes deal that values company at $157B

#193

Post by hintymad » Wed, Oct 02, 2024, 10:38 PM UTC

azinman2 wrote: post #172

hintymad wrote: post #170

Earlier quoted context omitted.

I assumed that Microsoft gave them discount and credits as investment, but the cost by itself is like any other big customer can get.

Of course the cost isn’t near zero, but is the pricing “at Microsoft’s cost”? If it is, then them building a datacenter wouldn’t save anything, plus would have enormous expenses related to, well, building, maintaining, and continuously upgrading data centers.

Good point. I updated the assumption accordingly. I assume the cost of using Azure cloud after discount but before the credit will be on par with Azure's big customers. And given the scale of OAI, I suspect that the only way to be profitable is to have their own infra.

Re: OpenAI completes deal that values company at $157B

#194

Post by adastra22 » Wed, Oct 02, 2024, 10:39 PM UTC

NickNaraghi wrote: post #139

deisteve wrote: post #44

$157B marketcap means they need to 20x their current revenue of roughly 400 million dollars by next year... But the revenue has flatlined and you can't raise your existing users cost by 20x... It truly is a mystery as to how anybody throwing other peoples money hopes to get it back from OpenAI

> But the revenue has flatlined and you can't raise your existing users cost by 20x... Why not? They’re already shopping a 2k/mo subscription option

Who would pay 2k/mo? For what?

That’s someone’s rent.

Re: OpenAI completes deal that values company at $157B

#195

Post by bearjaws » Wed, Oct 02, 2024, 10:41 PM UTC

Someone1234 wrote: post #31

I hope better competition appear before the enshittification begins. As far as I understand it they're actually underwater on their API and even $20/month pricing, so we'll either see prices aggressively increase and or additional revenue streams like ads or product placement in results. We've witnessed that every time a company's valuation is impossibly high: They do anything they can to improve outlook in an attemp…

> before the enshittification begins.

It already happens, when your model randomly gets worse all of a sudden for the same price of service.

Re: OpenAI completes deal that values company at $157B

#196

Post by jppope » Wed, Oct 02, 2024, 10:41 PM UTC

Can't help but think about this scene from silicon valley: https://www.youtube.com/watch?v=BzAdXyPYKQo

The "no revenue" scene... All OpenAI needs to do is start making some revenue to offset the costs!

Re: OpenAI completes deal that values company at $157B

#197

Post by nitwit005 » Wed, Oct 02, 2024, 10:42 PM UTC

tptacek wrote: post #158

nwiswell wrote: post #106

Earlier quoted context omitted.

> if they don't make the numbers make sense soon then I don't see things ending well for OpenAI. This is pretty much obvious just from the valuations. The wild bull case where they invent a revolutionary superintelligence would clearly value them in the trillions, so the fact that they're presently valued an order of magnitude less implies that it is viewed as an unlikely scenario (and reasonably so, in my opinion).

You don't need science fiction to find the bull case for OpenAI. You just have to think it stands to be the "next" Google, which feels increasingly plausible. Google's current market capitalization is in the trillions.

You're kind of selling investing in Google instead, given that they're one of OpenAI's competitors.

Re: OpenAI completes deal that values company at $157B

#198

Post by yifanl » Wed, Oct 02, 2024, 10:44 PM UTC

tptacek wrote: post #191

azinman2 wrote: post #171

Earlier quoted context omitted.

In 2023 Google had $307.39B in revenue and $24B in profit last quarter (suggesting ~100B in profit this year). Meanwhile OpenAI is losing money and making no where near these sums.

Facebook got all the way to an IPO with business fundamentals so bad that after the IPO, Paul Graham wrote a letter to all the then-current YC companies warning them that the Facebook stink was going to foul the whole VC market in the following years. Meta is now worth something like 1.4T.

Facebook made it out by committing click fraud against advertisers on a massive scale, which I don't see as a viable path for sama (even ignoring any legal concerns) considering that openAI isn't a platform company.

Re: OpenAI completes deal that values company at $157B

#199

Post by babelfish » Wed, Oct 02, 2024, 10:46 PM UTC

seper8 wrote: post #149

threwaway4392 wrote: post #134

They haven't even started their own versions of AdWords. Google's money printing is based on people telling Google what they want in the search bar, and google placing ads about what they want right when they ask for it. Today people type what they want in the ChatGPT search bar.

Difference is is that I can just switch to another LLM. I cant really do the same for Google.

Why not? For Google Search specifically, there is no lock-in (obviously yhe productivity suite has more)

Re: OpenAI completes deal that values company at $157B

#200

Post by ToValueFunfetti » Wed, Oct 02, 2024, 10:47 PM UTC

KoolKat23 wrote: post #159

ToValueFunfetti wrote: post #144

Earlier quoted context omitted.

They made 300 million revenue last month, apparently up 17x from last year[1]. To get a P/E ratio of 20, assuming (falsely) that their spending holds constant, they'd need ~4x more revenue [1] https://www.nbcnews.com/business/business-news/openai-closes...

For a P/E ratio of 20 they'd need to generate earnings (not revenue) of $7.85 billion, earnings are revenue less all costs.

Right, so

300m $/mo. * 12 mo. * x - costs = 7.85b

or

$3.6b * x = 7.85b + costs

I hold costs constant at $8B and get x = 4.4. $8B is probably a slight overestimate of current costs, I just took the losses from the article and discounted the last year's revenue to $3B. Users use inference which costs money so, in reality, costs will scale up with revenue, which is why I note this is a false assumption. But I also don't know how much of that went into training and whether they'll keep training at the current rate, so I can't get to a better guess.