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OpenAI's cash burn will be one of the big bubble questions of 2026

economist.com

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Re: OpenAI's cash burn will be one of the big bubble questions of 2026

#571

Post by shaky-carrousel »

throw310822 wrote: post #475
shaky-carrousel wrote: post #459

Earlier quoted context omitted.

Paid user base or free user base? Because free user base on a very expensive product is next to meaningless.

It's meaningful because it shows that people like the product a lot , and for a lot of different reasons. There are only few products that can reach such market penetration, not to mention in only three years. As the quality of AI increases, people will quickly realise that they are willing to pay for it as much as they pay for electricity. And the same goes for businesses.

They like the AI chat. Not ChatGPT. AI chats are interchangeable.

Re: OpenAI's cash burn will be one of the big bubble questions of 2026

#572

Post by sigmoid10 »

Fraterkes wrote: post #521
sigmoid10 wrote: post #497

Earlier quoted context omitted.

It all depends on the actual numbers. Consider this simplified example: If you are offered a deal that requires you to lay down 10 billion today and it has a 5% chance to pay out 150 billion tomorrow, your accountants will tell you not to take this deal because your expected return is -2.5 billion. But if you can offset 3 billion in cost to the tax payer, your expected return suddenly becomes $500 million, making it…

I get that this example is simplified, but doesn’t the maths here change drastically when the 5% changes by even a few percentage points? The error bars on Openais chance of succes are obviously huge, so why would this be attractive to accountants?

That's why you have armies of accountants rating stuff like this all day long. I'm sure they could show you a highly detailed risk analysis. You also don't count on any specific deal working, you count on the overall statistics being in your favour. That's literally how venture capital works.

Re: OpenAI's cash burn will be one of the big bubble questions of 2026

#573

Post by sigmoid10 »

well_ackshually wrote: post #535
sigmoid10 wrote: post #497

Earlier quoted context omitted.

It all depends on the actual numbers. Consider this simplified example: If you are offered a deal that requires you to lay down 10 billion today and it has a 5% chance to pay out 150 billion tomorrow, your accountants will tell you not to take this deal because your expected return is -2.5 billion. But if you can offset 3 billion in cost to the tax payer, your expected return suddenly becomes $500 million, making it…

If your accountants suggest that you take a single 5% chance deal, they probably skipped maths and statistics and you should fire them. It's the dumb as rocks MBAs that will go head first into the 5% chance deal.

Venture capitalists never take on a single deal. The same way you shouldn't put all your life savings into one stock, even if it has a 90% chance of working out. That's not how any of this stuff works.

Re: OpenAI's cash burn will be one of the big bubble questions of 2026

#574

Post by evrydayhustling »

Jare wrote: post #421
jotras wrote: post #396

Earlier quoted context omitted.

Something nobody's talking about: OpenAI's losses might actually be attractive to certain investors from a tax perspective. Microsoft and other corporate investors can potentially use their share of OpenAI's operating losses to offset their own taxable income through partnership tax treatment. It's basically a tax-advantaged way to fund R&D - you get the loss deductions now while retaining upside optionality later. T…

> For the right investor base, $10B in annual losses at OpenAI could be worth $2-3B in tax shields (depending on their bracket and how the structure works). That completely changes the return calculation I know nothing about finances at this level, so asking like a complete newbie: doesn't that just mean that instead of risking $10B they're risking $7-8B? It is a cheaper bet for sure, but doesn't look to me like a ga…

Your intuition is exactly correct. An investor with tax to offset can essentially access the same future upside at a discount

However, this discussion will be a perfect introduction to "finances at this level", where about 60% of the action is injecting more variables until you can fit a veneer of quantification onto any narrative.

Re: OpenAI's cash burn will be one of the big bubble questions of 2026

#576

Post by conartist6 »

__MatrixMan__ wrote: post #387
conartist6 wrote: post #379

Earlier quoted context omitted.

Yeah except that models don't propel communities towards new heights. They drive towards the averages. They take from the best to give to the worst, so that as much value is destroyed as created. There's no virtuous cycle there...

Is that constraint fundamental to what they are? Or are they just reflecting the behavior of markets when there's low hanging fruit around? When you look at models that were built for a specific purpose, closely intertwined with experts who care about that purpose, they absolutely propel communities to new heights. Consider the impact of alphafold, it won a Nobel prize, proteomics is forever changed. The issue is tha…

Experts making a specialized model isn't an example of an AI contributing value to society. All the value a model can offer comes from one of exactly two places: the person building the model, or the people the model trained on.

We know that the model training on the model training on the model leads to model collapse...

Re: OpenAI's cash burn will be one of the big bubble questions of 2026

#577

Post by g947o »

gordonhart wrote: post #568
cmiles8 wrote: post #276

AI is turning into the worst possible business setup for AI startups. A commodity that requires huge capital investment and ongoing innovation to stay relevant. There’s no room for someone to run a small but profitable gold mine or couple of oil wells on the side. The only path to survival is investing crazy sums just to stay relevant and keep up. Meanwhile customers have virtually zero brand loyalty so if you slip b…

For consumers, the chat history is the moat. Why switch to a different provider for a marginal model improvement when ChatGPT already “knows” you? The value of sticking to a single provider is already there, even with the limited memory features they’ve implemented thus far.

Do we know as a matter of fact that people don't want to leave ChatGPT for Gemini just because of chat history?

Re: OpenAI's cash burn will be one of the big bubble questions of 2026

#578

Post by Fraterkes »

sigmoid10 wrote: post #572
Fraterkes wrote: post #521

Earlier quoted context omitted.

I get that this example is simplified, but doesn’t the maths here change drastically when the 5% changes by even a few percentage points? The error bars on Openais chance of succes are obviously huge, so why would this be attractive to accountants?

That's why you have armies of accountants rating stuff like this all day long. I'm sure they could show you a highly detailed risk analysis. You also don't count on any specific deal working, you count on the overall statistics being in your favour. That's literally how venture capital works.

(I think) I get how venture capital works, my point is that the bullish story for openAI has them literally restructuring the global economy. It seems strange to me that people are making bets with relatively slim profit margins (an average of 500m on a 10b investment in your example) on such volatile and unpredictable events.

Re: OpenAI's cash burn will be one of the big bubble questions of 2026

#579

Post by utopiah »

throw310822 wrote: post #438
avalys wrote: post #139

AI is going to be a highly-competitive, extremely capital-intensive commodity market that ends up in a race to the bottom competing on cost and efficiency of delivering models that have all reached the same asymptotic performance in the sense of intelligence, reasoning, etc. The simple evidence for this is that everyone who has invested the same resources in AI has produced roughly the same result. OpenAI, Anthropic,…

> AI is a world-changing technology, just like the railroads were This comparison keeps popping up, and I think it's misleading. The pace of technology uptake is completely different from that of railroads: the user base of ChatGPT alone went from 0 to 200 million in nine months, and it's now- after just three years- around 900 million users on a weekly basis. Even if you think that railroads and AI are equally impac…

> user base of ChatGPT alone went from 0 to 200 million in nine months, and it's now- after just three years- around 900 million users on a weekly basis.

Doesn't have anything to do with AI itself. Consider Instagram then TikTok before this, WhatsApp before, etc. There is a clear adoption curve timeline : it's going WorldWide faster. AI is not special in that sense. It doesn't mean AI itself isn't special (arguable, in fact Narayanan precisely argue it's "normal") but rather than adoption pace is precisely on track with everything else.

Re: OpenAI's cash burn will be one of the big bubble questions of 2026

#580

Post by gniv »

cdf wrote: post #329
fooblaster wrote: post #160

Earlier quoted context omitted.

There is a pretty big moat for Google: extreme amounts of video data on their existing services and absolutely no dependence on Nvidia and it's 90% margin.

On paper, Google should never have allowed the ChatGPT moment to happen ; how did a then non-profit create what was basically a better search engine than Google? Google suffers from classic Innovator's Dilemma and need competition to refocus on what ought to be basic survival instincts. What is worse is the search users are not the customers. The customers of Google Search are the advertisers and they will always pri…

Google had an in-house chatbot that was never allowed to launch. I used to think that they were wrong but now I'm pretty sure they were right to not launch it. Users are very forgiving with a newcomer but not with an established company.
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