Comment by laweijfmvo
1 month ago
why does the article used words like burn and incinerate, implying that OpenAI is somehow making money disappear or something? They’re spending it; someone is profiting here, even if it’s not OpenAI. Is it all Nvidia?
Because that's normal language idioms in financial analysis reporting?
Because typically one expect a return on investment with that level of spending. Not only have they run at a loss for years, their spending is expected to increase, with no path to profitability in sight.
Tbh this whole AI thing is probably a negative ROI but it will pay off. Even if the debt is written off the AI enhancements that this whole misallocation of capital created are now "sunk" and are here to stay - the assets and techniques have been built.
There's an element of arms race between players, and the genie is out of the bottle now so have to move with it. Game theory is more driving this than economics in the short term.
Marginal gains on top of these investments probably have a ROI now (i.e. new investments from this point).
not that I disagree but would it be fair to say though that we have seen this before where it turned out OK? say Uber? Amazon?
IIRC, current estimates are that OpenAI is losing as much money a year as Uber or Amazon lost in their entire lifetime of unprofitability. Also, both Uber and Amazon spent their unprofitable years having a clear roadmap to profitability. OpenAI's roadmap to profitability is "???"
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To become the next Uber, do I just need to run huge losses?
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To my knowledge Amazon never debt financed their ops like this
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I suspect most of it is going to utilities for power, water and racking.
That being said, if I was Sam Altman I'd also be stocking up on yachts, mansions and gold plated toilets while the books are still private. If there's $10bn a year in outgoings no one's going to notice a million here and there.
How many gold toilets do you need? I mean, I don't even own one.
Tragically I don't make CEO money so I also don't have one but I presume you'd want to have at least one per mansion and another one in the office. Maybe a separate one for special occasions.
“Burn rate” is a standard financial term for how much money a startup is losing. If you have $1 cash on hand and a burn rate of $2 a year, then you have six months before you either need to get profitable, raise more money, or shut down.
Your burn is the money you spend that exceeds the money you earn, see also "burn rate".
> They’re spending it
That's what the words mean in this context.