81–90 of 102 posts
These people don't know what they're talking about.
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> 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…
Uber burned through roughly $32 billion in cumulative losses before reaching sustained profitability.
The rough timeline:
- Founded 2009, and lost money every year for about 14 years
- Biggest single-year losses: ~$8.5 billion in 2019 (the IPO year) and ~$9.1 billion in 2022
- 2023 was its first full year of net profitability, earning about $1.9 billion
- Uber has a market cap of $153bn as of today (at a P/E of 16.5)
OpenAI has received substantially more funding than Uber, so its losses will be substantially higher (spending investor money shows up as a loss on your P&L), but again that doesn't mean anything in and of itself.
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AI isn't Web3.
It is the same business model, just at a grander scale. There is no sustainable growth business underneath it, only vibes and hype, and the "future promise" of some miraculous breakthrough. It's becoming clearer by the minute that no such miracle is forthcoming. [edit] one small difference from web3 is that AI does seem to be at least marginally useful in some narrow verticals (devtools, infosec). That's pretty incon…
Web3 on the other hand, none of that. I think it was some sort of crypto scam spinoff.
Re. economics, I think AI will develop a bit like in the movies but hopefully not Terminator 2.
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With circular deals it’s hard to tell.
If nobody is gaining, nobody is losing.
Hard to imagine a perfectly identical offsetting transaction let alone triangular or circular.
Im not sure what this phrase even means. Does it mean that "70% of the revenue made by companies selling tokens comes from openAI and anthropic"? If so, how does it follow that "the AI industry doesn't exist"? For every other industry, the "size of the industry" is given by the total revenue, not by the percentage of the top 2. These people don't know what they're talking about.
I think he's implying the money in AI is all spending from OpenAI+Anthropic who get it from investors. But those two have annualized revenue of about $26bn and $74bn or about $100bn total which presumably represents actual customer demand for the product.
That's $100bn revenue on about $1tn capex so far which isn't enough to make it profitable in itself but the things growing like crazy so you'd expect that. $100bn is about 0.08% of world GDP so if AI customer demand grows to 1% of GDP that's up 12x from here.
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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…
Like its you want to both say that you agree with the overall point here, but also can't trust that very same conclusion because one part in the article reveals an obvious ignorance. Except no one has been able to actually state the exact ignorance here other than the suggestion that Microsoft is in fact the one losing $3 billion dollars, which doesn't really feel very far from Zitron's original implication anyway given all the stuff he writes!
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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…
OK got it. I guess this is a good call out or whatever then from you all, but, I gotta say, the point can't help but feel a little incommensurate to the $8.8 billion elephant in the room.. Like even in the original article, this is like a passing point to the overall thing, right? Like its you want to both say that you agree with the overall point here, but also can't trust that very same conclusion because one part…
Zitron makes too many "mistakes" like this to be taken seriously. In other words, he just isn't the right person to make the "huge AI bubble" argument because he doesn't understand (or he's being dishonest about) the financials.
I wouldn't consider OpenAI's financials to be pretty. There's circularity in the market that is a bit concerning. And while OpenAI's unit economics have improved it's still questionable as to whether the R&D and capex expenditure ever aligns to the business.
But Zitron is too sure of his argument (without the credibility to support that confidence) and is trying to pretend that there's absolutely nothing of value here. My best guess: there's some "irrational exuberance" and malinvestment but there is something real here and the unwind of the irrational exuberance and malinvestment won't be nearly as painful as Zitron believes for a variety of reasons, including the fact that there just isn't enough leverage in play.
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It is the same business model, just at a grander scale. There is no sustainable growth business underneath it, only vibes and hype, and the "future promise" of some miraculous breakthrough. It's becoming clearer by the minute that no such miracle is forthcoming. [edit] one small difference from web3 is that AI does seem to be at least marginally useful in some narrow verticals (devtools, infosec). That's pretty incon…
I'd say there's more. AI has been a staple of sci-fi and movies, a major field of academic research since Turing in the 1950s, predicted to be a big deal by major thinkers like John von Neumann, taken as a big deal by all the largest companies. Web3 on the other hand, none of that. I think it was some sort of crypto scam spinoff. Re. economics, I think AI will develop a bit like in the movies but hopefully not Termin…
So the whole thing hinges on, at some point in the near future--before the music stops--one of these institutions making a huge breakthrough and discovering AI. But there's no indication we're any closer to that breakthrough now than we were 10, 20, 30, or 50 years ago. They sure do have a lot of compute at their disposal, but there's no clear engineering plan to use it to scale up AI.
If this was a proven technology, there would be a clear path towards making it work. Advancing its industrial applications would be an engineering problem, not a science problem. AI is still science fiction (or at best a speculative theoretical research topic). That's not something sensible people throw money at, unless they've been scammed.
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OK got it. I guess this is a good call out or whatever then from you all, but, I gotta say, the point can't help but feel a little incommensurate to the $8.8 billion elephant in the room.. Like even in the original article, this is like a passing point to the overall thing, right? Like its you want to both say that you agree with the overall point here, but also can't trust that very same conclusion because one part…
The problem is that you can't be considered a credible critic of this stuff when you either don't understand accounting or are dishonest to make a point. Zitron makes too many "mistakes" like this to be taken seriously. In other words, he just isn't the right person to make the "huge AI bubble" argument because he doesn't understand (or he's being dishonest about) the financials. I wouldn't consider OpenAI's financia…
Like I just don't know how to trace this almost moralistic fixation everyone has just about this particular guy.. Everyday we see articles exactly like his by different people (or at least I do), but none attract the same kind of distinct attention.
What even leads you to the concern? Like, why should we think he will be the one conquering the narrative here?
Im not sure what this phrase even means. Does it mean that "70% of the revenue made by companies selling tokens comes from openAI and anthropic"? If so, how does it follow that "the AI industry doesn't exist"? For every other industry, the "size of the industry" is given by the total revenue, not by the percentage of the top 2. These people don't know what they're talking about.
I'm with you on Zitron being a bit challenged in the knowing what he's talking about department. I think he's implying the money in AI is all spending from OpenAI+Anthropic who get it from investors. But those two have annualized revenue of about $26bn and $74bn or about $100bn total which presumably represents actual customer demand for the product. That's $100bn revenue on about $1tn capex so far which isn't enough…
Surely AI is a thing that is here to stay, but I am not at all convinced that the big frontier models are going to be able to return their investment and if it becomes apparent they cannot, then you are almost certainly going to see a massive correction.