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70% of AI revenue comes from OpenAI and Anthropic [video]

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Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#71

Post by jryle70 »

dgellow wrote: post #55
nr378 wrote: post #51

Earlier quoted context omitted.

High growth companies often have significant negative cashflow during the early high growth era, followed by positive cashflow in the years later down the line. This phenomenon is known as the J-curve[1], and Uber is a good example of how this can turn out absolutely fine. To some extent, the entire Venture Capital industry exists to finance precisely this dynamic! Nb. I'm not suggesting OpenAI is fairly valued, or t…

> High growth companies often have significant negative cashflow during the early high growth era, followed by positive cashflow in the years later down the line. Uber is the antithesis of OpenAI, it’s not a good example. Uber was burning money on acquiring customers. OpenAI is burning money to provide their service (and the R&D they need to continue to have valuable models). They cannot just stop and turn profitable…

> They cannot just stop and turn profitable like Uber.

Of course they can. They could just stop training new models and milk the existing ones. A billion users check in ChatGPT weekly. Software developers wouldn't stop using Codex.

OpenAI is not unlike any other startups who try to build their marketshare early on. No matter how much money they lose, they would be fine as long as they could raise more money than they spend. Uber is exactly the same. HN during 2015-2020 were full of comments predicting Uber's demise.

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#72

Post by [deleted] »

SahAssar wrote: post #29
reilly3000 wrote: post #12

I think this whole premise is ignoring the point that most decently sized companies want to and eventually will be running their own LLM workloads. Currently use cases are limited by scope and imagination, and predominantly focused on cost efficiency. Once a use case becomes a top line revenue driver budgets will become essentially only limited by ROI. There are some inference workloads that are unacceptable to send…

Is anyone really running GPU databases in prod at scale? Or are you assuming that the GPU compute from a crash will become so cheap that it makes this niche scale?

[deleted]

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#73

Post by grey-area »

ElProlactin wrote: post #65
grey-area wrote: post #56

Earlier quoted context omitted.

You have avoided answering the question. The accounting mechanics are uninteresting, lots of normal accounting rules are abused for nefarious purposes (see Enron et al). What is interesting is why this was done. Which subsidiary owns the loss and why?

Here's the logic since it's not that hard. Say Parent Co. controls Subsidiary LLC and owns 60% of it. Minority Corp. owns the other 40%. Subsidiary LLC loses $10 billion. Consolidation accounting requires Parent Co. to report the full $10 billion loss, as if it owned all of Subsidiary LLC, which it doesn't. Then, on the next line, it attributes the portion belonging to the other owner (Minority Corp.). There are two…

What is actually interesting here is which subsidiary, what it does, and how much they own and are liable for.

If they own 90% and it is core to the business that’s very different from owning 2% say.

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#74

Post by ElProlactin »

grey-area wrote: post #73
ElProlactin wrote: post #65

Earlier quoted context omitted.

Here's the logic since it's not that hard. Say Parent Co. controls Subsidiary LLC and owns 60% of it. Minority Corp. owns the other 40%. Subsidiary LLC loses $10 billion. Consolidation accounting requires Parent Co. to report the full $10 billion loss, as if it owned all of Subsidiary LLC, which it doesn't. Then, on the next line, it attributes the portion belonging to the other owner (Minority Corp.). There are two…

What is actually interesting here is which subsidiary, what it does, and how much they own and are liable for. If they own 90% and it is core to the business that’s very different from owning 2% say.

https://openai.com/our-structure/

"Also as of closing of the recapitalization, Microsoft holds roughly 27% of OpenAI Group, and the remaining 47% is held by current and former employees and investors."

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#75

Post by dgellow »

jryle70 wrote: post #71
dgellow wrote: post #55

Earlier quoted context omitted.

> High growth companies often have significant negative cashflow during the early high growth era, followed by positive cashflow in the years later down the line. Uber is the antithesis of OpenAI, it’s not a good example. Uber was burning money on acquiring customers. OpenAI is burning money to provide their service (and the R&D they need to continue to have valuable models). They cannot just stop and turn profitable…

> They cannot just stop and turn profitable like Uber. Of course they can. They could just stop training new models and milk the existing ones. A billion users check in ChatGPT weekly. Software developers wouldn't stop using Codex. OpenAI is not unlike any other startups who try to build their marketshare early on. No matter how much money they lose, they would be fine as long as they could raise more money than they…

I don’t think you understand how bad OpenAI economics are. The company is burning billions just to operate. They cannot stop the training treadmill due to competitive pressure, but assuming they do that would only reduce their expanses, not increase their revenue. They would still be in the negative. We are talking about a company that has more than >$750B of infrastructure expenditure commitment for 2030.

The number of users they have checking weekly is irrelevant, most of them are free users, unless they find a way to make money from them, but their ads business has been a flop so far.

For context: Uber losses were $12B over 5 years. AWS was $5B invested over 7y.

OpenAI is projected to lose more than $14B just this year!!!

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#77

Post by michelb »

dgellow wrote: post #22
reticulates wrote: post #20

Earlier quoted context omitted.

but this is just an absolute fantasy, what, exactly, will this compute be doing? Our lives are already deeply entwined with technology and use barely any compute. How could our lives become 100x more dependent on compute? You can be thrilled by this exciting technology and all the possibilities it brings without thinking it is going to require this huge capital investment in GPUs. You could radically change billions…

Push everybody to buy hardware they don’t need to constantly run agents for pretty basic tasks, such as processing your daily emails and sending you little summaries notifications. So, the most inefficient software tools ever produced, but that keeps the whole industry alive. That’s pretty much the vision Jensen Huang is selling to ensure NVIDIA continues to grow

I hope we can quickly escape these tasks and the focus on coding. It’s all very superficial. There are a ton of serious AI workloads imaginable and I haven’t seen anyone pushing those frontiers, at least not publicly. Nvidia had a shiny keynote about their digital twin of the world for solving large problems but i guess that one died already.

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#78

Post by babymetal »

reilly3000 wrote: post #12

I think this whole premise is ignoring the point that most decently sized companies want to and eventually will be running their own LLM workloads. Currently use cases are limited by scope and imagination, and predominantly focused on cost efficiency. Once a use case becomes a top line revenue driver budgets will become essentially only limited by ROI. There are some inference workloads that are unacceptable to send…

Is it just me or is this comment extremely difficult to parse? Besides the lack of any links/evidence the assertions are full of jargon "decently sized", "scope and imagination", "productionalize their own fine-tunes", "This whole notion... is ridiculous". It is currently at the top of HN and I hope that is just because it's a Sunday afternoon in many places.

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#79

Post by DesaiAshu »

dgellow wrote: post #55
nr378 wrote: post #51

Earlier quoted context omitted.

High growth companies often have significant negative cashflow during the early high growth era, followed by positive cashflow in the years later down the line. This phenomenon is known as the J-curve[1], and Uber is a good example of how this can turn out absolutely fine. To some extent, the entire Venture Capital industry exists to finance precisely this dynamic! Nb. I'm not suggesting OpenAI is fairly valued, or t…

> High growth companies often have significant negative cashflow during the early high growth era, followed by positive cashflow in the years later down the line. Uber is the antithesis of OpenAI, it’s not a good example. Uber was burning money on acquiring customers. OpenAI is burning money to provide their service (and the R&D they need to continue to have valuable models). They cannot just stop and turn profitable…

If the leaked data is to be believed, OpenAI is spending 40% of revenue on sales and marketing, which is not the OPEX profile of a product-led technology company

Broadly speaking, companies that spend 40%+ of revenue on sales and marketing end up being a bit of a drag on society. Eg. Salesforce’ product quality is far lower than winners in other sectors that sit closer to 10-15% of revenue on sales and marketing

Maybe - just as how the city of Sao Paolo implemented a ban on billboards - we can implement a law where a 3 year rolling average of sales and marketing spend cannot exceed 20% of revenue in that period

Re: 70% of AI revenue comes from OpenAI and Anthropic [video]

#80

Post by npilk »

beepbooptheory wrote: post #53
ElProlactin wrote: post #47

Earlier quoted context omitted.

You can look up ASC 810-10-45. OpenAI isn't a single company. I haven't followed all the details with its structure change/recapitalization, but it's (I believe) a parent sitting on top of an LLC that outside investors like Microsoft hold a large minority stake in. The rules say that the parent has to report 100% of the LLC's revenue and expenses as if it owned everything and then, at the end, back out the share of t…

OK interesting. Who specifically are these other subsidiaries that clearly account for this loss though? I get it's just a trueism for those in the know like you, but it's pretty fascinating for me at least! Like is there one example company we can point to here? Even if there were like 20 subsidiaries and the combined loss was 3 billion, that would feel noteworthy on its own? Like to be absolutely honest, this point…

Here's an analogy (as far as I understand the situation...)

Let's say I own a lemonade stand. I sell you a 20% stake.

My stand loses $10. When I report my financial results, I report losing $10. Then I report that your share of those losses is $2, and my share is $8. This creates transparency.

So OpenAI really did lose $8.8B or whatever, but some of those losses are 'attributed' to other shareholders/owners of their subsidiaries, because they have a complicated corporate structure. So they report both numbers - the total loss, and then the part they 'own'.

So when Ed says "It’s unclear what this means", he's either terribly uninformed or intentionally misleading his readers into thinking something fishy is going on when it isn't.

Either way, it's bad journalism - if you don't know what it means, shouldn't you try to find out or ask an expert or something and then inform your readers? (And the thing is, it would easy enough to dunk on them for losing $8 billion, without adding these weird insinuations!)

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