IMO this looks largely like another circular investment. Amazon's investment is tied to OpenAI using AWS for their Frontier product and I assume Nvidia's conditions are that OpenAI continue buying hardware from them. Then there's SoftBank though given that those are the same guys that invested heavily in WeWork, I assume this is just very brash bullishness on their part.
From my perspective, I hope that OpenAI survives and can pull of their IPO but I just have that nagging feeling in my gut that their IPO will be rejected in much the same way that the WeWork IPO was rejected.
On the one hand you can look at these companies investing and take it as a signal that there is something there (in OpenAI) that's worth investing in. On the other hand all these companies that are investing are basically getting that investment back through spending commitments and such and are just using OpenAI as a proxy for what is essentially buying more revenue for themselves.
When their IPO hits later this year I hope that it's the former case and there's actually some good underlying fundamentals to invest in. But based on everything I've read, my gut is telling me they will eventually implode under the weight of their business model and spending commitments.
The "circular investment" is mostly start up companies using their stocks instead of cash to pay for server hardware and cloud computing. There is a few extra steps in between that make things look weird and convoluted, but the end results is really just big companies giving hardware and getting shares of ai companies in exchange for it.
It’s like Toys R Us not having enough money to pay Mattel for Barbie dolls and telling Mattel they can have partial ownership of the company if they just supply them with some more toys.
But the problem is that Toys R Us is spending $15, 20, or maybe even $50 (who knows?) to sell a $10 toy.
Toys R Us continues selling toys faster and faster despite a lack of profit, making Mattel even more dependent on Toys R Us as a customer. It blows up the bubble where a more natural course of action would be for Toys R Us to go bankrupt or scale back ambitions earlier.
Because it’s circular like this, it lends toward bigger crashing and burning. If OpenAI fails, all these investors that are deeply integrated into their supply chains lose both their investment and customer.
Cisco did this in 1999. That's how my smallish apartment building in Sweden ended up with a kick-ass Cisco 10 Gbps switch in its basement a year later - when these cost real money.
I think the HOA still only pays like $10/month/apartment for an entry level that's now defined as 250/250 Mbit/s. Someone must have been unusually savvy with the contracts.
Nvidia is investing assets into OAI - it has to. Because OAI needs to become successful for Nvidia's story in the long-term to play out, to justify its current stock price.
It's not "continue" buying as much as this is NVIDIA fronting the money for (most of) the hardware OpenAI has already ordered from them. It's like borrowing rent money from your drug dealer.
> On the one hand you can look at these companies investing and take it as a signal that there is something there (in OpenAI) that's worth investing in. On the other hand all these companies that are investing are basically getting that investment back through spending commitments and such and are just using OpenAI as a proxy for what is essentially buying more revenue for themselves.
I don't understand how this is some kind of cheat code. Let's say I give you $100 on the condition that you buy $100 worth of product from me. And let's say that product cost me $80 to produce. Isn't that basically the same as me giving you $80? I don't see at all how that's me "basically getting that investment back".
I give you $100 cash and you give me $100 worth of stock in return. Now you give me $100 cash to buy something from me that cost me $80 to produce. I end up with $100 worth of stock in your company which cost me only $80. No?
NVIDIA gross margins lately are like 75%, so it's more like you give me $100 to buy something from me that cost me $25 to produce, hence I end up with $100 worth of stock in your company and it only cost me $25.
> Isn't that basically the same as me giving you $80?
In your accounting, you can claim that you have an investment worth $100 and book $100 worth of revenue. You're juicing your sales numbers to impress shareholders - presumably, without your $100, the investee wouldn't have bought $100 worth of your product. The last thing your shareholders want to see are your sales numbers stop growing, or heaven forbid, start shrinking.
Nvidia is not the first company to "buy" sales of its own product via simple or convoluted incentive schemes. The scheme will work for a while until it doesn't.
> Let's say I give you $100 on the condition that you buy $100 worth of product from me. And let's say that product cost me $80 to produce. Isn't that basically the same as me giving you $80?
Why limit myself to $100 for a product that costs $80? I could just as well give you $1 000 000 to buy this same product from me. That way, I have a $1 000 000 share of your company, and I have $1 000 000 in revenue, and it only cost me $80.
This distorts the market for the product we're trading, and distorts the share price for both my company and yours.
> Isn't that basically the same as me giving you $80? I don't see at all how that's me "basically getting that investment back".
It's a good question, what I think you're missing is that if the market is valuing me (NVIDIA) at 25x revenue then it's more like I traded you (OpenAI) a GPU it cost me $80 to make for $100 worth of OpenAI stock, and I got a bonus $2500 in market cap of my own stock (which existing shareholders like).
IOW for every incremental "$100" in revenue (circular or otherwise), existing shareholders get paid "$2500" in equity (NVIDIA appreciation + OpenAI shares).
This "works" for NVIDIA and its shareholders as long as they/the market keeps thinking $100 of OpenAI stock is a good price for a GPU. If OpenAI tangibly fails to deliver on this valuation then NVIDIA may wind up in the red on these deals.
Caveat: it's a bit more complicated than that as OpenAI doesn't typically buy/operate GPUs directly afaict, rather they team up with the big cloud providers like AMZN (also part of the deal). But it's an useful way to wrap your head around the economics, I think (open to correction, not a domain of professional expertise).
I don't see anything _inherently_ unethical about this as some comments seem to imply. It's definitely riskier than accepting cash, in which case you're free not to play, but it's a calculated risk based on future expectations of growth by OpenAI. Granted there are some sketchy incentives qua existing shareholders that could materialize in pump and dump dynamics.
Laws on competition make this kind of arrangements illegal, so you would have to exerce influence and have the invested in company pretends you happen to have been picked among competitors.
In any case the SEC will be focused on whether the filings aren't made up to fraud investors, so they could reject the IPO, of the invested in company. Your own entity also is at risk.
We all know MS gets away with it, they have good legal goons who find way to make all of it appears fair with regards to the law.
How I see it is the companies want to jack their revenue and in turn jack the price of their stock and please shareholders. Those are the two main goals which this accomplishes, regardless of the underlying fundamentals.
The reason this doesn't make sense is that this is the math of monopoly creation! The government should be making sure companies don't go around throwing money at circular deals that will make them and their friends a fortune while cornering the market, but it seems that capitalism rules don't exist anymore in the US.
I'm not a finance expert, but it may be because investment and purchase are are taxed differently (I don't know). You gave $100 away as investments, got $100 back as revenue. Meanwhile you establish that your product are worth $100 (while costing $80) and you have $100 worth of shares. Without considering side effects, you gave away $80 worth of product for $100 (supposed) worth of shares. But shares are subject to side effects and those side effects can be quite nice (making the news, establishing price,...).
The issue is that there's no organic force behind those changes and it makes everything hollow. You could create a market inside a deserted area and make it appear like a metropolis.
> I don't understand how this is some kind of cheat code. Let's say I give you $100 on the condition that you buy $100 worth of product from me. And let's say that product cost me $80 to produce. Isn't that basically the same as me giving you $80? I don't see at all how that's me "basically getting that investment back".
What if the product only costs you $20 to produce?
Comparing OpenAI and WeWork is a nonsensical perspective. OpenAI is shipping the most revolutionary product in a generation, with 800 million monthly active users. It's the fastest revenue ramp ever, at incredible scale -- $20B+ ARR. These are real fundamentals. They matter. And the cost of inference is coming down all the time.
WeWork was a short-term/long-term lease arbitrage business. The two are nothing alike.
It used to be revolutionary, but now there is a huge difference: plenty of competition, and a growing number of high-quality models that can run offline (for free!) or cheaper (Gemini-Flash for example).
They are in some way the Nokia of AI, "we have the distribution, product will sell", but this is not enough if innovation is weak.
They are even lagging behind (GPT-5 is a weaker coder than Claude, Sora is a toy compared to Seedance 2.0, etc).
One Apple releases the AIPhone, running offline models, with 32 GB of unified memory, with optional cloud requests, then it's going to be super though for OpenAI.
They aren't making money on the vast majority of those 800 million monthly actives. I wonder how many will stick around once they roll out ads. If they keep those users with ads, they definitely will be worth their valuation.
How will they make money on their product exactly? To the tune of being worth nearly a trillion dollars? There is no guarantee that inference will go down, we’ve seen some improvement with cheap models, but they aren’t what people want, and otherwise models stay expensive to run and use
The only reason to draw this comparison is to show SoftBank are not as competent as they'd like to appear to be - so putting their name in relation to investors of OAI does not strengthen the prospects we should share re. OAI.
It’s one of the worst takes I’ve heard. OpenAI creates the fastest growing app ever, spawns a revolution bigger than the internet, and this guys take is they are like WeWork…
But it can also simply be the financial framing for direct bartering. Which is even more direct than regular financial transactions.
"I will provide these resources you need, in exchange for part ownership", and/or "a limited license to your tech", "right to provide access to our customers on these terms", Etc."
Amazon doesn't need any frothy fake revenue. But they do want to offer their customers the most in demand models, with the best financial terms for Amazon.
Nvidia wants customers, but not at the expense of throwing money away. Their market cap may be volatile, but their books are beyond solid.
I would be a lot more concerned if OpenAI was getting "funding" from a quantum computer startup, and vice versa.
$730B pre-money for a company where each model is roughly 2x profitable on its own, but each next model costs 10x the last. The whole thing only works if scaling keeps delivering. Research (Sara Hooker et al.) is not encouraging on that front, compact models already outperform massive predecessors on downstream tasks while scaling laws only predict pre-training loss reliably.
Wrote about both the per-model math and the scaling question:
> each model is roughly 2x profitable on its own, but each next model costs 10x the last. The whole thing only works if scaling keeps delivering.
This is a decent argument, but it's not the death knell you think.
Models are getting 99% more efficient every 3 years - to get the same amount of output, combined with hardware and (mostly) software upgrades - you can use 99% less power.
The number of applications where AI is already "good enough" keeps growing every day. If the cost goes down 99% every three years, it doesn't take long until you can make a ton of money on those applications.
If AI stopped progressing today, it would take probably a decade or longer for us to take full advantage of it. So there is tons of forward looking revenue that isn't counted yet.
For the foreseeable future, there are MANY MANY uses of models where a company would not want to host its own models and would be GLAD to pay an 4-5x cost for someone else to host the model and hardware for them.
I'm as bullish on OpenAI being "worth" $730B as I was on Snap being worth what it IPO'd for - which it's still down about 80% (AFTER inflation, or about ~95% adjusting for gold inflation).
But guess what - these are MINIMUM valuations based on 50-80% margins - i.e. they're really getting about ~$30B - the rest is market value of hardware and hosting. OpenAI could be worth 80% less, and they could still make a metric fuck-ton of money selling at IPO with a $1T+ market cap to speculative morons easily...
Realistically, very rich people with high risk tolerance are saying that they think OpenAI has a MINIMUM value of ~$100B. That seems very reasonable given the risk tolerance and wealth.
When models get cheaper to run for OpenAI, they also get cheaper for everyone else. It gets commoditized. AI might be able to do more, but most people aren’t going to pay for a thing they could get for free. See the many models on Huggingface as examples of that.
And as the number of things AI is “good enough” at increases, the list of things on the frontier that people will want to pay OpenAI for shrinks. Even if OpenAI can consistently churn out PhD level math, most companies don’t care about that.
So a necessary (but not sufficient) condition for the math to work out is that frontier tasks still exist and are profitable. This is why CEOs keep hyping up AGI. But what they really want is for developers to keep paying to get AI to center a div.
> Models are getting 99% more efficient every 3 years - to get the same amount of output, combined with hardware and (mostly) software upgrades - you can use 99% less power.
Even if true, this still doesn't bend the curve when paying for the next model.
> If AI stopped progressing today, it would take probably a decade or longer for us to take full advantage of it. So there is tons of forward looking revenue that isn't counted yet.
If this is true, it's true for the technology overall, and not necessarily OpenAI since inference would get commoditized quickly at that point. OpenAI could continue to have a capital advantage as a public stock, but I don't think it would if the music stopped.
> Models are getting 99% more efficient every 3 years - to get the same amount of output, combined with hardware and (mostly) software upgrades - you can use 99% less power.
This is such a poor argument for a number of reasons.
1. Three years ago is basically when the "AI race" really kicked off amongst the frontier companies. You're effectively comparing a car from the 1920/30's to a modern car.
2. Past performance is not an indicator of future performance. You can't just say that LLM's will grow and improve at a fixed rate for all time, that isn't how they or anything else works in the real world.
3. Since it's an open secret that companies like Anthropic and OpenAI are running their models at a loss, a static 99% cheaper every three years arc still puts these companies at a net negative position unless compute, energy and water all somehow start getting 99% cheaper every three years.
We said all the same shit about VR, dude. Even had a global pandemic show up to boost everyone's interest in the key market of telepresence. Turns out the merry go round can stop abruptly.
Yes, but there's a chance that actually training is done more or less for free by companies like OpenAI. The reason being that they do a gigantic amount of inference for end users (for which they get paid), but their servers can't be constantly utilized at 100% by inference. So, if they know how to schedule things correctly (and they probably do), they can do the training of their new model on the unutilized compute capacity. If you or I were to pay for that training, it would be billions of dollars, but for them it is just using compute that otherwise would be idle.
What makes you think this trend will continue? In a situation with finite resources (eg the number of parameters), the default is to assume things will plateau.
I was reading a paper on dark silicon and how it broke the beautiful scaling laws of the past (Moore's law/Dennard Scaling). We hit a wall, innovated and at the moment, the hardware industry is thriving. To me, that means scaling the industry and riding that momentum wasn't wrong. In fact, it allowed us to be where we are today.
Why are we so against, in principle, to the current pre-training scaling laws? Perhaps, we'll require new innovations at some point, but the momentum allows us to reach to newer heights that we've never climbed before.
It'd be interested in seeing how exactly the lawyers figured out how to define AGI. It must be a fairly mundane set of KPIs that they just arbitrarily call AGI, the term will probably devalue significantly in the coming years.
The actual quote is this though:
> hitting an AGI milestone or pursuing an IPO
So it seems softer than actually achieving AGI or finalising an IPO.
I'd assume the real trigger here is "reaching AGI," which would help OpenAI shrug off some of their Microsoft commitments thus making OpenAI models available on Amazon Bedrock. Which is what Amazon is really after.
Very convenient to put "AGI" in all these agreements because the term is fundamentally undefinable. So throw out whatever numbers you want and fight about it and backtrack later.
The problem with AGI is not that it's undefinable, but that everyone has a different one. Kinda like consciousness in that regard.
Fortunately, OpenAI already wrote theirs down. Well, Microsoft[0] says they did, anyway. Some people claimed it was a secret only a few years ago, and since then LLMs have made it so much harder to tell the difference between leaks and hallucinated news saying this, but I can say there's at least a claim of a leak[1].
Has OpenAI laid out the specific definition of what an AGI is for this case? The one from their mission is quite vague and the general community has nothing close to a universal common definition... which means they will most likely just define it as what they already have when the timing is right.
> Has OpenAI laid out the specific definition of what an AGI is for this case?
Yes and it's actually hilarious: a system that can perform most economically valuable work better than humans, or specifically when the AI generates $100 billion in profits.
At least in their Microsoft contract it means $100 billion in profit, though they don't need to have actually made that money, they just need to show they're on track to do so.
like the other comment, openai can force itself onto the massive index like VOO/FXAIX etc to make retail folks to provide liquidity exit for openai investors.
Someone please explain how OpenAI is not Netscape 2026. They had first mover advantage but no network effect, no moat, and are racing to stay ahead of infinitely resourced incumbents.
Not GP, and not saying I agree with them, but it may be worth remembering that Netscape had 90% market share at one point. Active user count may not be the moat you imagine.
How many of those users are paying? Where is the profit? How many users will be willing to use ChatGPT if they had to pay? Might have to pull out the questions like its 2026.
When they cost more to serve than they bring in, customer switching cost is vanishingly low, your competitor has revenue from other things and you don't.
I can’t. I think they are one viral TikTok away from the pendulum swinging to Chat Gemini, which for most people, the no cost version is perfectly adequate
> Today we’re announcing $110B in new investment at a $730B pre-money valuation. This includes $30B from SoftBank, $30B from NVIDIA, and $50B from Amazon.
e.g. it talks about running NVIDIA's systems (?) on AWS
> NVIDIA has long been one of our most important partners, and their chips are the foundation of AI computing. We are grateful for their continued trust in us, and excited to run their systems in AWS. Their upcoming generations should be great.
Probably something like NVLink Fusion. AWS has been doing deals with suppliers for which the smallest unit of deployable compute is a 44U rack (e.g. Oracle), so this is more of the same.
At least investors like Amazon can afford to lose their investment ($50 billion). That would be like a normal person losing a few thousand dollars. It hurts, but life would go on.
That’s still $100B unaccounted for, and I’m pretty sure Amazon would expect fair treatment if other investors get a bailout. More likely, OpenAI is the one to receive the bailout, likely at the behest of the bigger investors, Amazon included.
That's why there's been such a massive effort to position LLMs as critical to national security. If they can make themselves big enough and critical enough (even in just perception) to the government they won't let them fail. They'll let individuals lose their livelihoods of course, since it's rugged individualism for all of us lowley normal people. But corporate socialism will keep the big players afloat.
> Hopefully this will allow them to continue to provide me unreasonable amounts of compute for €20/month. Enjoying it while it lasts…
I'm getting unreasonable amounts of compute for $0/m. I have ChatGPT, Claude, Gemini and Grok in different browser tabs. When one runs out, I switch to the next.
Use these freebies/relatively cheap tools up 'whilst stocks last'.
I personally managed to create a very high quality marketing promo vid using grok. After spending weeks of enduring a lot of pain. But I saved myself tens of thousands.
I took advantage of 30 Grok premium subscriptions that were given to me via a free trial. There's no doubt the cost of services I took advantage of is in the tens of thousands.
But what do I care? I get what I want and then I get out before the freebies disappear.
LOL at the cry babys down-voting. Get mad bruh, get mad.
So let´s see if I understood well this one:
Got 110 Billions with the promise that either AGI will happen soon (:) or going public before the end of the year.
Eitherway you get to double your 110 Billions no matter what (who will be left to pay the full bill after it, public or public)?
Very interesting, I will follow it closely, mostly to see how you ROI 110 Billions in a couple of years.
Without circular investments and valuations what would Open AI be worth? 100B? 300B? Entirely on revenue alone it seems like 20B. Current valuation appears to be two orders of magnitude off.
Well technically "Open""AI" is a SaaS company. It should be worth almost nothing due to AI being able to code AI (AI training is probably the simplest enterprise code).
>Without circular investments and valuations what would Open AI be worth? 100B? 300B? Entirely on revenue alone it seems like 20B. Current valuation appears to be two orders of magnitude off.
They just passed $20B in revenue, you can't really expect a company with this much hype and traction to have a 1x multiple.. that's not to say a 35x multiple makes sense either.
All I see everywhere is "OpenAI generated $13 billion in revenue in 2025" and it just cost them $8 billion. $5B loss in 2025 and projections of losing $14B this year.
There's this saying that if you owe the bank a million dollars, you have a big problem, but if you owe the bank 100 million dollars, the bank has a big problem.
Is the same thing true for corporations? At some point the numbers are so wild the entire economy must help you succeed? I don't mean "too big to fail" exactly, more like "so big eventual success is guaranteed at all costs"
Those are the same thing. The whole point of saying "too big to fail" is to evoke the moment in the housing crash where governments largely threw most of their citizens under the bus by bailing out banks rather than homeowners for the banks' wildly irresponsible decisions. "Too big to fail" means the government steps in and bails you out, and that phrase became popular because for many it was the final nail in the coffin for their trust in government
I wonder if there is "too big for IPO". Saudi Aramco in 2019 sold shares worth $25.6 billion in IPO. Even offering just 5% of OpenAI to public would shatter that record. Well, unless public isn't actually interested in investing such huge amounts.
Amazon hedging $35 billion on an IPO (we know the odds of AGI with LLMs are vanishing small) is concerning. The hedge signals that they think it's a good "greater fool" investment, otherwise they should be happy to take equity in a company they think will be stable/profitable.
The jobs are going to be mining coal, mining rare earth, building nuclear reactors, building data centres etc. You may need to move to asia to get the job.
"UBS downgraded the US stock market" happened today for a reason and you're implying that the US dollar lost 1000% of it's value since less than a decade ago? 1/10th of what it is worth today?
What would really help is knowing the details of such funding. The hierarchy of who gets paid first in event of going under is very illuminating and while I am not a banker I always wonder if there are caveats too complicated even for the large investors to understand
I don't know that OpenAI specifically is the weak link but this definitely adds to the argument that the entire sector is a wash with the same three or four companies passing around the same $50B over and over. OpenAI is just the link that seems most likely to break first.
I've seen this sentiment (OpenAI collapse imminent) a lot on Youtube and Reddit, but it somehow evaded me on here
Bad comments about OpenAI's long-term viability I've seen plenty here. But that's not the same as the people predicting one of the hottest companies right now will somehow suddenly run out of cash all on its own
Its hottest service by far is completely free, the vast majority of users of its free service aren't converting to users of its paid services (and often stop using the free service too because they were just tourists seeing what all the fuss was about, or they were compelled to use the free service by their employer), and its data center plans are an impossible money pit.
The fact it's become a household name internationally (giving it the appearance of success) can't save it from spending dramatically more money than it makes. It's been coasting on investments, but it's not even close to being actually profitable.
Huge or well-known companies have collapsed before, even though - because people become so used to them existing - it never quite feels like it will actually happen until it does.
I don't think they are going to collapse. But it was only a couple of years ago that many people thought OpenAI had a big (some thought insurmountable) lead in a race to dominate a winner take all markee. Some people did correctly state that OpenAI had no moat in those days so credit there where it's due.
Now it's looking like a competitive blood bath where ever increasing levels of investment is needed just to main market position. Their frontier models are SOTA for 4 weeks before a competitor comes and takes the crown. They are standing on much shakier ground than they were 2 years ago.
A competitive bloodbath plus OpenAI has investment valuing it like it will achieve agi rather than (merely) being a huge advancement in computing, but not a fundamental rewriting of how all work is done.
If nobody invested in OpenAI how long could they keep the lights on? They're not profitable yet, and a lot of the wealth that Sam Altman seems to be making revolves around strange circular deals.
By comparison, Anthropic is projected to break even in 2028. Google's Gemini is already profitable.
What source do you have the Gemini is profitable? Are you referring only to the chat app, or to Google'a AI Ventures division? Or including Google Cloud AI related revenue?
Nobody saw coming the huge demand for coding agents. Not even OpenAI or Anthropic themselves. Those were side projects just a year ago and now dominate token demand. And they keep rising.
Oh I do think they did see it, considering how good they are they've probably been a tuning focus for a while.
The signal the agent usage is sending though is that Anthropic is way ahead since all we hear about is Claude these days despite OpenAI spending so much more money, Antrophic is also out trialling vending machines,etc.
ChatGPT apart from generating text was a bit of a query/research tool but now that Google has their AI search augmentation shit somewhat together I'm not feeling much need for ChatGPT as a research partner.
So now the big question is, with coding and search niches curtailed, where will OpenAI be able to generate profits from to justify their insane spending?
the $30b investment from nvidia is instead of a previously-announced $100b investment from nvidia, so it's not like this is an entirely good-news story for OpenAI.
How much revenue have they generated? How about profit?
If investors keep throwing obscene money at OpenAI, sure, they can stay afloat forever. Can't argue with that. But if we're talking about a sustainable business, I still don't see it.
You'll always find someone claiming X or Y are close to collapse at any given time. As even a broken clock is right twice a day, eventually one of these predictions will randomly be proven correct. That person will then be elevated to a genius forecaster and rake in cash for a decade or two.
Actually it is the other way around; every upstart claims that their invention is the mostest revolutionariest thing ever. 99.9% of them are not. The nay sayers are right most of the time.
Recent high-profile examples include Segway, NFT, Crypto as a whole, pre-tranformers voice assistants and various "Design Thinking" projects like those Amazon prime buttons.
Selling Shovels is quite lucrative whether there is an actual mining business or just a gold rush.
At one point Jensen Huang will be out (retired or forced by staginating sales) and can definitely look back on a very successful career. That much is certain.
This is simply a symptom of economic misallocation, decades of wealth concentration has moved the incentives away from normal healthy investments, to a minuscule minority desperately trying to chase ever shrinking short term gains, when all they are really doing is gambling on hooking the next tech evolutionary whale.
So much human potential given to such a tiny group of incompetent morons.
When the history books are being written, this era will make the robber baron/gilded age pale in comparison.
Lot of skepticism about OpenAI's survival. I am a user of both Claude (max) and Codex (plus). Some neutral points.
- Anthropic owes to AWS for their enterprise growth. Yes, their own talent as well.
- AWS investing for a purpose - solving problems with multi-agent systems - "exclusive third-party cloud distribution provider for OpenAI Frontier, which enables organizations to build, deploy, and manage teams of AI agents.". I think the multi-agent landscape will be production-ready in 2026 for solving really complex problems. AWS saw something in Codex and OpenAI's models.
- On Circular investments - if you make $100B of your revenue from ecosystem of players who spend $50B on your infra... where else would you go?
$730B pre-money is remarkable context for an industry that barely existed commercially a decade ago. Worth noting the implied revenue multiple here - OpenAI reportedly hit $4B ARR in 2024, so this round prices them at ~180x forward revenue. For comparison, Salesforce peaked at ~12x. The bull case obviously requires AGI-level defensibility that makes traditional SaaS multiples irrelevant. The bear case is that frontier model costs continue compressing (DeepSeek effect) and commoditization erodes the moat before the network effects lock in. Either way, this is a defining data point for how markets price transformative but uncertain technology.
These are geopolitical activities akin to the arms buildup of the Cold War, but happening somewhat more openly through the guise of private sector investments. The names of the companies involved are ephemeral. The numbers "invested" are largely imaginary, just play money pumped into the system over the last few years, flowing around, searching for a place to park. The result will be a certain amount of tangible infrastructure in the form of datacenters, power plants, semiconductor fabs. It's a Hail Mary move to keep pace with a certain geopolitical competitor. This process may propel society to the next level or may collapse it, depending on how society chooses to use these resources and how successful the competitor is at its own similar endeavor.
$730B on roughly $11B ARR is ~66x. Microsoft trades at 12x. The market is pricing OpenAI as infrastructure, not software. That's probably right. The implication is that the productivity gains accrue to whoever controls the infrastructure layer. The workers and companies building on top of it are taking the displacement risk without the upside.
> We continue to have a great relationship with Microsoft. Our stateless API will remain exclusive to Azure, and we will build out much more capacity with them.
This sounds a bit like going forward (some) OpenAI APIs will also run on platforms other than Azure (AWS)?
OpenAI desperately needs to be available outside Azure. We are exclusively using Anthropic atm because it is what is available in AWS Bedrock and it works. These things are solidifying fast.
What's the math here if they go public in 2027, with next to 1T in valuation? How much more growth can the company have for regular investors? Surely they won't have the capital of multiple FAANG companies...
Nvidia will get all that money back via GPU purchases, Amazon via cloud rental and SoftBank is being typical SoftBank - a rich but not particularly bright kid in a class :) .
"I give you $30 billion if you use it to buy $30 billion of stuff from me" doesn't sound like a very good investment. Is Nvidia expecting more back than it puts in? Enough more to make the deal profitable?
"I give you 30B$ worth of hardware that costs me <10B$ to make in exchange for 30B$ worth of shares in your company" would be a more accurate description.
Well, I won't pretend I know the answer :) . But I assume that a) they are partially betting on making a normal return on investment (i.e. OAI not crashing), b) they profit from running a huge expense/revenue cycle (a company making say a million of profit and having a billion revenue is favored better than the same but with only ten million revenue), and c) even if all goes wrong, it is still better to get back most of the investment even if not everything and zero profit, compared to a possibility of just losing it all like SoftBank or other investors.
In the end it's exchanging GPUs for OpenAI shares. It's not a non-trade, and in the current market Nvidia could really sell the stuff for cash. The marginal cost is very much sharply positive.
"Basically invented AI" by running on principles that Minsky wrote about in the 80s, and improvements Google developed in the early 10s, on bigger and bigger computers. But "Basically invented".
ChatGPT needs to catch up hard, for me their model is unusable and I cancelled my subscription 5-6 months ago, so to me this post is hot air. I need to see results, going back to try Codex 5.2, then 5.3, downloading their new desktop client, their VS code extension, their weird browser, is time I wish I had back.
Interesting story for sure (to be clear I'm not talking about the writing by Reuters), but would you buy or skip the OpenAi IPO?
To me it feels like one of those throw some play money into it and see what happens sort of situations. Expect it will return negative due to the raw financials and outlook, but small chance the brand carries enough weight with the public that it spikes.
> The Information had previously reported that $35 billion of Amazon’s investment could be contingent on the company either achieving AGI or making its IPO by the end of the year. OpenAI’s announcement confirms the funding split, but says only that the additional $35 billion will arrive “in the coming months when certain conditions are met.”
So basically, Amazon is buying into the IPO at an early price. Maybe this is the time to divest from MSCI world. I don’t want to be the bag holder in the world’s largest pump and dump.
It can both be true at the same time: That AI is going to disrupt our world and that Open AI does not have a business model that supports its valuation.
Did it ever occur to you that an entire generation of developers are going to retire in less than 20 years? They are betting that the software industry will be autonomous. Really, think of our industry like AUV phenomena. We’re the drivers that are about to be shown the door, that’s the bet.
World will still need software, lots of it. Their valuation is based on an entire developer-less future world (no labor costs).
Okay, I can understand investment from SoftBank, and maybe somewhat from Amazon (if they plan to use OpenAI's models), but investment from NVidia who will then sell OpenAI the GPUs with X% markup doesn't make sense to me.
Everyone thinks this bubble will continue until AGI(bulls) or until someone calls them on it(bears). I think it will continue until someone finds a quick way to make cheap energy(bullish) or until we can't build more power plants to support AI growth(bearish).
While nothing fancy has happened yet in the area of cheap energy, there is still enough power around the world to build AI data centers. The problem is this power exits in countries that the West has decided, many times for good reasons, they don't want to deal with their leaders.
I'm predicting that over 2027, either the US will become more aggressive in making war with these countries or company CEOs will start developing "reality-distorsion-fields" around them and decide having enough power for the next datacenter is more for the good of humanity. Before that Europe will decide that AI training on human faces(eg. of non-Europeans) is not really a problem and will allow US companies to train their models in EU countries.
and they say its not a bubble! we saw it with oracle deal, big announcement and than nothing, same with nvidia and now same thing is going again i hpe this is cash infusion and not some credit deal.
That's a pretty lofty valuation for a company that has yet to demonstrate code generation anywhere near Anthropic's models if they're leaning into the engineering angle.
"Calvinism makes pretty lofty claims for a religion who has yet to demonstrate soul salvation anywhere near Lutheranism if they're leaning into the reformation angle"
Google has enough momentum at this point to make the startups technically irrelevant, and they've only just started speeding up. Arguably they've already leapfrogged Anthropic and OpenAI in every field that matters, infrastructure, distribution, price, verification, all google, enterprise and actual model intelligence, currently a toss up but google is improving the fastest, SOTA in so many categories eventually this will coincide with the FOTM.
On a tangent, I remember companies like Slack triggering the unicorn craze. They said that it was just better to aim for a billion than some number like 900M or 1.2B, because psychologically, it meant more to employees, investors, and customers.
OpenAI is in that place where nobody really cares for these mind games. It's not very reliable. But it is useful enough to pay for. It's cheap enough to be an impulse purchase where some guy decides to just subscribe to ChatGPT because they're working on an important slide or sketching a logo.
Remember when it was a huge milestone when gigantic companies like Apple and Microsoft were striving to be the first $1T company backed with decades of building actual businesses with actual profit?
Feels like Nvidia getting in the game here might just put them at more risk. If things don't work out they'll be out their money and future sales and so on.
It is bad enough AI sucked up so much investment money, hitting companies that do make profitable things hard if AI bubble collapses would be bad...
It’s already a joke to call the slop generators “AI”, so giving it another fake name won’t really make much of a difference any more. Nothing short of a miracle will be able to top the “creative marketing” we already have.
Our economy has turned into an ouroboros: a circle of snakes shitting in each others mouth until they get so sick we the taxpayer will get the privilege of bailing them out. I'm really fucking excited to eat shit for the 3rd time in 18 years. Super pumped.
- Amazon's $50B is only $15B, with the rest being "after certain conditions are met", whatever that means (probably an IPO, which isn't happening)
- The $30B each from softbank and NVIDIA is paid in installments
So this is more a $35B fundraise, with a _promise_ of more, maybe, if conditions are met. Not _bad_, but yet more gaslighting from Mr Altman. Anyone reporting this as a closed fundraising deal is being disingenuous at best.
> - Amazon's $50B is only $15B, with the rest being "after certain conditions are met", whatever that means (probably an IPO, which isn't happening)
Startup funding is often given in increments depending on milestones being met. Most startups just don’t announce that it’s conditional.
For large funding rounds, nobody gets a check for the full amount at once.
The funding would not be conditional on an IPO because that wouldn’t make any sense. The IPO is the liquidity event for the investors and there’s no reason for a startup to take private investment money that only enters the company after IPO.
This is pretty standard. Usually the conditions are performance benchmarks, but may also include IPO. Typically its done in multiple tranches, e.g. 15B at the start, 5 more if you gain +500m users, 5 more if your profit exceeds X, and the rest for IPO (im over simplifying)
The conditions are either an IPO or achieving AGI. I’d be curious to know how the contract defines AGI. If I recall correctly, the OAI-Microsoft deal just defined it as “AI-shaped tech that can generate $100 billion in annual profits”, which I think is actually close to the correct answer, insofar as we will have AGI when the markets decide we have AGI and not when some set of philosophical criteria seem to be satisfied.
> If I recall correctly, the OAI-Microsoft deal just defined it as “AI-shaped tech that can generate $100 billion in annual profits”, which I think is actually close to the correct answer
So if they hit 100 billion annual then it's AGI but if Kellogg's launches “FrostedFlakes-GPT" and steals 30% of the market it's no longer AGI at 70 billion?
There is not a single OpenAI model in the top 10 on openrouter's ranking page. The market is saying something about the comparative value of OpenAI.
Edit: yes, it is true that many people do integrate directly with OpenAI. That doesn't negate the fact that Openrouter users are largely not using OpenAI.
Agreed it's not really good signal (many sampling biases) but user count is not relevant, most money is from heavy API users. 900M users with free or cheap subscription are nothing compared to even 10k heavy API users.
On the other hand, big users don't use openrouter. At $work we have our own routing logic.
1. openrouter is API usage. There is obviously consumer side
2. people often use openrouter for the sole purpose of using a unified chat completions API
3. OpenAI invented chat completions; if you use openrouter for chat completions often you can just switch your endpoint URL to point to the OAI endpoint to avoid the openrouter surcharge!
4. Hence anyone with large enough volume will very likely not use openrouter for OpenAI; there is an active incentive to take the easy route of changing the endpoint URL to OAI’s
The differentiating factor will be access to proprietary training data. Everyone can scrape the public web and use that to train an LLM. The frontier companies are spending a fortune to buy exclusive licenses to private data sources, and even hiring expert humans specifically to create new training data on priority topics.
> At what point are the models going to all be "good enough", with the differentiating factor being everything else, other than model ranking?
It's already come for vast swathes of industries.
Most organizations have already been able to operationalize what are essentially GPT4 and GPT5 wrappers for standard enterprise usecases such as network security (eg. Horizon3) and internal knowledge discovery and synthesis (eg. GleanAI back in 2024-25).
Tbf it's a reasonable question... I think it's a little tricky to pin down the equivalent of "kinetic energy" in purely economic terms, though you might look at the rate of flow of money as some analogy for the speed/energy of particles (speed of individual dollars changing hands). In that sense, the more frequent and larger these deals get, the hotter the market is. This is not a novel analogy.
Two economists were walking down the street when they spotted a giant dog turd on the ground.
One of them wanted to have some fun, so said to the other - "I'll give you $100 if you take a big bite of that turd".
His colleague figured $100 was a good chunk of cash, so did the deed. Feeling thoroughly humiliated, he pocketed the $100 and they carried on.
Further down the street they came upon another turd.
The angry economist now wanted revenge so made the same proposal back to his colleague, who also agreed and took a bite of the turd, earning back his $100.
Later one of them said to the other "you know, I can't help but feel we both ate shit for no reason."
His collegue replied "what do you mean? We raised the national GDP by $200."
I did upvote, it's witty, but it's a bit of a misrepresentation of how the economy works.
In practice, people don't tend to pay people to eat shit without gain. You are paying people to help you. Money gaslights everyone into helping each other, the most selfish people become the most selfless.
Of course, real capitalism is much more complex and much uglier than this fantasy. When certain people end up with long-term control of large piles of money, the whole thing gets distorted. They get to make lots of money on interest without doing anything, and making other people eat more shit for scraps. That's the "capital" part of capitalism.
But the toy world-model that this joke is making fun of, is actually the one core positive aspect of capitalism and brings all the prosperity we have: tricking people into helping each other.
It’s not craze. It’s technology shift. Bitcoin and 3D printing were craze. It’s like a move from analog photography to digital. I am telling you this as a very conservative person. Even for me it’s helpful.
3D printing is helpful too. The infrastructure created during the dot-com bubble of the late 1990s was also helpful. The UK is still profiting from the railway infrastructure created during the railway craze of the 1840s (https://en.wikipedia.org/wiki/Railway_Mania). The question is just how much of the valuation of AI companies is because they are useful and how much is speculation...
That's certainly a take, industry loves it. Sure, all that "everybody will print widgets at home instead of going to the store" stuff was never going to happen, but 3d printing is nonetheless here to stay.
It can be both a craze and a technology shift. AI isn't going away, it will transform some industries. But right now it's overhyped, overfunded and due a trip back to reality.
It most definitely COULD be a craze from the perspective of scope of investment, societal impact and timing. No one surfing the crest of this wave could be described as "conservative".
What bitcoin gave us essentially? Huge pump and dump schemes coordinated by big hands? Crypto investments which made 95% of investors poorer? What's left?
Maybe 0.01% of it was beneficial.
Does anyone have any ethical concerns using openai regarding money donated to the current US administration in one way or another? I will search for more accurate details about that situation. I know about several other ethical concerns with openai that people have, including copyright and other considerations regarding the work being trained on, as well as lack of action regarding users who are harmed by their usage of the product, often regarding mental health, environmental concerns, actually quite a few others, but I am interested if many people think their political donations are an issue or not.
IMO this looks largely like another circular investment. Amazon's investment is tied to OpenAI using AWS for their Frontier product and I assume Nvidia's conditions are that OpenAI continue buying hardware from them. Then there's SoftBank though given that those are the same guys that invested heavily in WeWork, I assume this is just very brash bullishness on their part.
From my perspective, I hope that OpenAI survives and can pull of their IPO but I just have that nagging feeling in my gut that their IPO will be rejected in much the same way that the WeWork IPO was rejected.
On the one hand you can look at these companies investing and take it as a signal that there is something there (in OpenAI) that's worth investing in. On the other hand all these companies that are investing are basically getting that investment back through spending commitments and such and are just using OpenAI as a proxy for what is essentially buying more revenue for themselves.
When their IPO hits later this year I hope that it's the former case and there's actually some good underlying fundamentals to invest in. But based on everything I've read, my gut is telling me they will eventually implode under the weight of their business model and spending commitments.
This piece that was on HN yesterday corroborates your gut: https://www.ben-evans.com/benedictevans/2026/2/19/how-will-o...
The "circular investment" is mostly start up companies using their stocks instead of cash to pay for server hardware and cloud computing. There is a few extra steps in between that make things look weird and convoluted, but the end results is really just big companies giving hardware and getting shares of ai companies in exchange for it.
I think you’re just describing how it’s circular.
It’s like Toys R Us not having enough money to pay Mattel for Barbie dolls and telling Mattel they can have partial ownership of the company if they just supply them with some more toys.
But the problem is that Toys R Us is spending $15, 20, or maybe even $50 (who knows?) to sell a $10 toy.
Toys R Us continues selling toys faster and faster despite a lack of profit, making Mattel even more dependent on Toys R Us as a customer. It blows up the bubble where a more natural course of action would be for Toys R Us to go bankrupt or scale back ambitions earlier.
Because it’s circular like this, it lends toward bigger crashing and burning. If OpenAI fails, all these investors that are deeply integrated into their supply chains lose both their investment and customer.
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Cisco did this in 1999. That's how my smallish apartment building in Sweden ended up with a kick-ass Cisco 10 Gbps switch in its basement a year later - when these cost real money.
I think the HOA still only pays like $10/month/apartment for an entry level that's now defined as 250/250 Mbit/s. Someone must have been unusually savvy with the contracts.
https://newsroom.cisco.com/c/r/newsroom/en/us/a/y1999/m11/ci...
Cisco survived but it took them until late last year to recover their 1999 stock value (that's 26 years).
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Nope wrong framing.
Nvidia is investing assets into OAI - it has to. Because OAI needs to become successful for Nvidia's story in the long-term to play out, to justify its current stock price.
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It's not "continue" buying as much as this is NVIDIA fronting the money for (most of) the hardware OpenAI has already ordered from them. It's like borrowing rent money from your drug dealer.
Great analogy. ;-)
Doubt Jensen sees himself as a “dealer” but considering the vendor lock-in and margins, he pretty much is the Tony Montana of Ai Chips.
It’s nuts that this type of financing is legal.
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Conversely it’s equity for an in-kind investment. Dave Choe taking the Facebook shares writ large.
> On the one hand you can look at these companies investing and take it as a signal that there is something there (in OpenAI) that's worth investing in. On the other hand all these companies that are investing are basically getting that investment back through spending commitments and such and are just using OpenAI as a proxy for what is essentially buying more revenue for themselves.
I don't understand how this is some kind of cheat code. Let's say I give you $100 on the condition that you buy $100 worth of product from me. And let's say that product cost me $80 to produce. Isn't that basically the same as me giving you $80? I don't see at all how that's me "basically getting that investment back".
I give you $100 cash and you give me $100 worth of stock in return. Now you give me $100 cash to buy something from me that cost me $80 to produce. I end up with $100 worth of stock in your company which cost me only $80. No?
NVIDIA gross margins lately are like 75%, so it's more like you give me $100 to buy something from me that cost me $25 to produce, hence I end up with $100 worth of stock in your company and it only cost me $25.
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> Isn't that basically the same as me giving you $80?
In your accounting, you can claim that you have an investment worth $100 and book $100 worth of revenue. You're juicing your sales numbers to impress shareholders - presumably, without your $100, the investee wouldn't have bought $100 worth of your product. The last thing your shareholders want to see are your sales numbers stop growing, or heaven forbid, start shrinking.
Nvidia is not the first company to "buy" sales of its own product via simple or convoluted incentive schemes. The scheme will work for a while until it doesn't.
The problem is here:
> Let's say I give you $100 on the condition that you buy $100 worth of product from me. And let's say that product cost me $80 to produce. Isn't that basically the same as me giving you $80?
Why limit myself to $100 for a product that costs $80? I could just as well give you $1 000 000 to buy this same product from me. That way, I have a $1 000 000 share of your company, and I have $1 000 000 in revenue, and it only cost me $80.
This distorts the market for the product we're trading, and distorts the share price for both my company and yours.
> Isn't that basically the same as me giving you $80? I don't see at all how that's me "basically getting that investment back".
It's a good question, what I think you're missing is that if the market is valuing me (NVIDIA) at 25x revenue then it's more like I traded you (OpenAI) a GPU it cost me $80 to make for $100 worth of OpenAI stock, and I got a bonus $2500 in market cap of my own stock (which existing shareholders like).
IOW for every incremental "$100" in revenue (circular or otherwise), existing shareholders get paid "$2500" in equity (NVIDIA appreciation + OpenAI shares).
This "works" for NVIDIA and its shareholders as long as they/the market keeps thinking $100 of OpenAI stock is a good price for a GPU. If OpenAI tangibly fails to deliver on this valuation then NVIDIA may wind up in the red on these deals.
Caveat: it's a bit more complicated than that as OpenAI doesn't typically buy/operate GPUs directly afaict, rather they team up with the big cloud providers like AMZN (also part of the deal). But it's an useful way to wrap your head around the economics, I think (open to correction, not a domain of professional expertise).
I don't see anything _inherently_ unethical about this as some comments seem to imply. It's definitely riskier than accepting cash, in which case you're free not to play, but it's a calculated risk based on future expectations of growth by OpenAI. Granted there are some sketchy incentives qua existing shareholders that could materialize in pump and dump dynamics.
That's like giving them* $20.
And inflate your revenue by $80.
Laws on competition make this kind of arrangements illegal, so you would have to exerce influence and have the invested in company pretends you happen to have been picked among competitors.
In any case the SEC will be focused on whether the filings aren't made up to fraud investors, so they could reject the IPO, of the invested in company. Your own entity also is at risk.
We all know MS gets away with it, they have good legal goons who find way to make all of it appears fair with regards to the law.
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In exchange for 100$ of your stock AND making your revenue numbers look insane for the next cycle ?
Also Nvidia margins are waaay higher than 20%
How I see it is the companies want to jack their revenue and in turn jack the price of their stock and please shareholders. Those are the two main goals which this accomplishes, regardless of the underlying fundamentals.
The reason this doesn't make sense is that this is the math of monopoly creation! The government should be making sure companies don't go around throwing money at circular deals that will make them and their friends a fortune while cornering the market, but it seems that capitalism rules don't exist anymore in the US.
For both Amazon and Nvidia, their marginal costs are probably much lower than their fixed costs.
I'm not a finance expert, but it may be because investment and purchase are are taxed differently (I don't know). You gave $100 away as investments, got $100 back as revenue. Meanwhile you establish that your product are worth $100 (while costing $80) and you have $100 worth of shares. Without considering side effects, you gave away $80 worth of product for $100 (supposed) worth of shares. But shares are subject to side effects and those side effects can be quite nice (making the news, establishing price,...).
The issue is that there's no organic force behind those changes and it makes everything hollow. You could create a market inside a deserted area and make it appear like a metropolis.
> I don't understand how this is some kind of cheat code. Let's say I give you $100 on the condition that you buy $100 worth of product from me. And let's say that product cost me $80 to produce. Isn't that basically the same as me giving you $80? I don't see at all how that's me "basically getting that investment back".
What if the product only costs you $20 to produce?
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Comparing OpenAI and WeWork is a nonsensical perspective. OpenAI is shipping the most revolutionary product in a generation, with 800 million monthly active users. It's the fastest revenue ramp ever, at incredible scale -- $20B+ ARR. These are real fundamentals. They matter. And the cost of inference is coming down all the time.
WeWork was a short-term/long-term lease arbitrage business. The two are nothing alike.
They had a first-mover advantage for sure.
It used to be revolutionary, but now there is a huge difference: plenty of competition, and a growing number of high-quality models that can run offline (for free!) or cheaper (Gemini-Flash for example).
They are in some way the Nokia of AI, "we have the distribution, product will sell", but this is not enough if innovation is weak.
They are even lagging behind (GPT-5 is a weaker coder than Claude, Sora is a toy compared to Seedance 2.0, etc).
One Apple releases the AIPhone, running offline models, with 32 GB of unified memory, with optional cloud requests, then it's going to be super though for OpenAI.
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They aren't making money on the vast majority of those 800 million monthly actives. I wonder how many will stick around once they roll out ads. If they keep those users with ads, they definitely will be worth their valuation.
How will they make money on their product exactly? To the tune of being worth nearly a trillion dollars? There is no guarantee that inference will go down, we’ve seen some improvement with cheap models, but they aren’t what people want, and otherwise models stay expensive to run and use
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The only reason to draw this comparison is to show SoftBank are not as competent as they'd like to appear to be - so putting their name in relation to investors of OAI does not strengthen the prospects we should share re. OAI.
It’s one of the worst takes I’ve heard. OpenAI creates the fastest growing app ever, spawns a revolution bigger than the internet, and this guys take is they are like WeWork…
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Will they maintain an edge over other AI companies long term? With so many market participants will it become a race to the bottom?
This valuation puts their P/E around 40.
Anthropic $380B valuation on $13B ARR. P/E around 30.
5 years ago Uber was in similar territory. Tesla... Well we won't mention Tesla.
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Circular investing can be a smoke screen.
But it can also simply be the financial framing for direct bartering. Which is even more direct than regular financial transactions.
"I will provide these resources you need, in exchange for part ownership", and/or "a limited license to your tech", "right to provide access to our customers on these terms", Etc."
Amazon doesn't need any frothy fake revenue. But they do want to offer their customers the most in demand models, with the best financial terms for Amazon.
Nvidia wants customers, but not at the expense of throwing money away. Their market cap may be volatile, but their books are beyond solid.
I would be a lot more concerned if OpenAI was getting "funding" from a quantum computer startup, and vice versa.
Nvidia sells the picks, AWS rents the mine, OpenAI digs, and the money just loops around the table...
I am expecting OpenAI stock to be the most volatile in history. The first 3-6 months will be fun.
How far the volatility ripples out will give us a real look into just how self-reinforced the financials truly are.
$730B pre-money for a company where each model is roughly 2x profitable on its own, but each next model costs 10x the last. The whole thing only works if scaling keeps delivering. Research (Sara Hooker et al.) is not encouraging on that front, compact models already outperform massive predecessors on downstream tasks while scaling laws only predict pre-training loss reliably.
Wrote about both the per-model math and the scaling question:
(1) https://philippdubach.com/posts/ai-models-as-standalone-pls/
(2) https://philippdubach.com/posts/the-most-expensive-assumptio...
EDIT: Removed the dot after et; bc apparently it's an entire word (the more you know..)
> each model is roughly 2x profitable on its own, but each next model costs 10x the last. The whole thing only works if scaling keeps delivering.
This is a decent argument, but it's not the death knell you think.
Models are getting 99% more efficient every 3 years - to get the same amount of output, combined with hardware and (mostly) software upgrades - you can use 99% less power.
The number of applications where AI is already "good enough" keeps growing every day. If the cost goes down 99% every three years, it doesn't take long until you can make a ton of money on those applications.
If AI stopped progressing today, it would take probably a decade or longer for us to take full advantage of it. So there is tons of forward looking revenue that isn't counted yet.
For the foreseeable future, there are MANY MANY uses of models where a company would not want to host its own models and would be GLAD to pay an 4-5x cost for someone else to host the model and hardware for them.
I'm as bullish on OpenAI being "worth" $730B as I was on Snap being worth what it IPO'd for - which it's still down about 80% (AFTER inflation, or about ~95% adjusting for gold inflation).
But guess what - these are MINIMUM valuations based on 50-80% margins - i.e. they're really getting about ~$30B - the rest is market value of hardware and hosting. OpenAI could be worth 80% less, and they could still make a metric fuck-ton of money selling at IPO with a $1T+ market cap to speculative morons easily...
Realistically, very rich people with high risk tolerance are saying that they think OpenAI has a MINIMUM value of ~$100B. That seems very reasonable given the risk tolerance and wealth.
When models get cheaper to run for OpenAI, they also get cheaper for everyone else. It gets commoditized. AI might be able to do more, but most people aren’t going to pay for a thing they could get for free. See the many models on Huggingface as examples of that.
And as the number of things AI is “good enough” at increases, the list of things on the frontier that people will want to pay OpenAI for shrinks. Even if OpenAI can consistently churn out PhD level math, most companies don’t care about that.
So a necessary (but not sufficient) condition for the math to work out is that frontier tasks still exist and are profitable. This is why CEOs keep hyping up AGI. But what they really want is for developers to keep paying to get AI to center a div.
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> Models are getting 99% more efficient every 3 years - to get the same amount of output, combined with hardware and (mostly) software upgrades - you can use 99% less power.
Even if true, this still doesn't bend the curve when paying for the next model.
> If AI stopped progressing today, it would take probably a decade or longer for us to take full advantage of it. So there is tons of forward looking revenue that isn't counted yet.
If this is true, it's true for the technology overall, and not necessarily OpenAI since inference would get commoditized quickly at that point. OpenAI could continue to have a capital advantage as a public stock, but I don't think it would if the music stopped.
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I love that you are already confident fitting a curve. I want some of that swagger in my life.
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"If AI stopped progressing today, it would take probably a decade or longer for us to take full advantage of it."
AI stopped progressing, or LLMs? I really dislike people throwing the term AI around.
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> 99% more efficient every 3 years
It's 2x efficiency. Then I'd take 50% less power instead of ridiculous 99% less power.
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> Models are getting 99% more efficient every 3 years - to get the same amount of output, combined with hardware and (mostly) software upgrades - you can use 99% less power.
This is such a poor argument for a number of reasons.
1. Three years ago is basically when the "AI race" really kicked off amongst the frontier companies. You're effectively comparing a car from the 1920/30's to a modern car.
2. Past performance is not an indicator of future performance. You can't just say that LLM's will grow and improve at a fixed rate for all time, that isn't how they or anything else works in the real world.
3. Since it's an open secret that companies like Anthropic and OpenAI are running their models at a loss, a static 99% cheaper every three years arc still puts these companies at a net negative position unless compute, energy and water all somehow start getting 99% cheaper every three years.
ok, but everything depends on your numbers being correct. 99% improved efficiency seems kind of a way too optimistic prediction.
> Models are getting 99% more efficient every 3 years
The LLM industry has only be around for like 4 years. Extrapolating trends from that is pretty naive.
> Models are getting 99% more efficient every 3 years
How many years total are you basing this on?
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We said all the same shit about VR, dude. Even had a global pandemic show up to boost everyone's interest in the key market of telepresence. Turns out the merry go round can stop abruptly.
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> Models are getting 99% more efficient every 3 years
Ugh. Someone has to do this: https://xkcd.com/605/
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> each next model costs 10x the last
Yes, but there's a chance that actually training is done more or less for free by companies like OpenAI. The reason being that they do a gigantic amount of inference for end users (for which they get paid), but their servers can't be constantly utilized at 100% by inference. So, if they know how to schedule things correctly (and they probably do), they can do the training of their new model on the unutilized compute capacity. If you or I were to pay for that training, it would be billions of dollars, but for them it is just using compute that otherwise would be idle.
What makes you think this trend will continue? In a situation with finite resources (eg the number of parameters), the default is to assume things will plateau.
> EDIT: Removed the dot after et; bc apparently it's an entire word (the more you know..)
From latin "et alia", abbreviated as "et al." - it's not a single word but an expression.
I was reading a paper on dark silicon and how it broke the beautiful scaling laws of the past (Moore's law/Dennard Scaling). We hit a wall, innovated and at the moment, the hardware industry is thriving. To me, that means scaling the industry and riding that momentum wasn't wrong. In fact, it allowed us to be where we are today.
Why are we so against, in principle, to the current pre-training scaling laws? Perhaps, we'll require new innovations at some point, but the momentum allows us to reach to newer heights that we've never climbed before.
Et is an entire word and doesn’t need a period at the end.
> Amazon will start with an initial $15 billion investment, followed by another $35 billion in the coming months when certain conditions are met.
Those conditions are an IPO or reaching AGI [1].
Nvidia and SofBank will pay in installments.
Also very interesting that Microsoft decided to not invest in this round. A PR statement was made though [2].
[1] https://americanbazaaronline.com/2026/02/26/amazon-to-invest...
[2] https://openai.com/index/continuing-microsoft-partnership/
Once they "reach AGI", will they have a big party on a carrier with a "Mission Accomplished" banner?
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It'd be interested in seeing how exactly the lawyers figured out how to define AGI. It must be a fairly mundane set of KPIs that they just arbitrarily call AGI, the term will probably devalue significantly in the coming years.
The actual quote is this though:
> hitting an AGI milestone or pursuing an IPO
So it seems softer than actually achieving AGI or finalising an IPO.
I'd assume the real trigger here is "reaching AGI," which would help OpenAI shrug off some of their Microsoft commitments thus making OpenAI models available on Amazon Bedrock. Which is what Amazon is really after.
Very convenient to put "AGI" in all these agreements because the term is fundamentally undefinable. So throw out whatever numbers you want and fight about it and backtrack later.
> fundamentally undefinable
Incredible, how an entire religion has sprung up around AGI.
The problem with AGI is not that it's undefinable, but that everyone has a different one. Kinda like consciousness in that regard.
Fortunately, OpenAI already wrote theirs down. Well, Microsoft[0] says they did, anyway. Some people claimed it was a secret only a few years ago, and since then LLMs have made it so much harder to tell the difference between leaks and hallucinated news saying this, but I can say there's at least a claim of a leak[1].
[0] https://blogs.microsoft.com/blog/2026/02/27/microsoft-and-op...
[1] It talks about it, but links to a paywalled site, so I still don't know what it is: https://techcrunch.com/2024/12/26/microsoft-and-openai-have-...
The definition used to be "passes the Turing test" .. until LLMs passed it.
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Has OpenAI laid out the specific definition of what an AGI is for this case? The one from their mission is quite vague and the general community has nothing close to a universal common definition... which means they will most likely just define it as what they already have when the timing is right.
> Has OpenAI laid out the specific definition of what an AGI is for this case?
Yes and it's actually hilarious: a system that can perform most economically valuable work better than humans, or specifically when the AI generates $100 billion in profits.
At least in their Microsoft contract it means $100 billion in profit, though they don't need to have actually made that money, they just need to show they're on track to do so.
> Has OpenAI laid out the specific definition of what an AGI is for this case?
AGI is an IPO.
All the major investments in these big rounds have come in tranches, right?
So they’re getting in on the IPO.
Are they going to get stock for it or is it a PIPE?
Personally, I don’t think I want to get in on this at retail prices.
It can both be true at the same time that AI going to disrupt our world and that being an AI lab is a terrible business.
But will you have a choice once they enter the indexes ? People are automatically going to invest into that (circular) pyramid scheme.
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like the other comment, openai can force itself onto the massive index like VOO/FXAIX etc to make retail folks to provide liquidity exit for openai investors.
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Someone please explain how OpenAI is not Netscape 2026. They had first mover advantage but no network effect, no moat, and are racing to stay ahead of infinitely resourced incumbents.
How are ~1B active users not "moat"? Might have to pull out the "Haters gonna hate" like it's 2007
Not GP, and not saying I agree with them, but it may be worth remembering that Netscape had 90% market share at one point. Active user count may not be the moat you imagine.
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“In December, Gemini traffic increased by 28.4% month-over-month, while ChatGPT traffic decreased by 5.6%”
https://www.businessinsider.com/openai-chatgpt-vs-gemini-web...
"What's you number one piece of hiring advice?"
"Hire for slope, not Y-intercept. This is actually my number one piece of life advice."
-@sama, who I’m generally a big fan of. But the job is now harder
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How many of those users are paying? Where is the profit? How many users will be willing to use ChatGPT if they had to pay? Might have to pull out the questions like its 2026.
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How is it a moat? Myspace had 300M active users on an early internet.
If market share is a moat, IBM should still be the biggest tech company.
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> How are ~1B active users not "moat"?
When they cost more to serve than they bring in, customer switching cost is vanishingly low, your competitor has revenue from other things and you don't.
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But why are these users sticking to ChatGPT specifically ?
If it’s not the quality of their answers ?
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Are those users Locked in or are they treating the service like a commodity easily changed when the price goes up to stop hemorrhaging money.
Google worked as a free service because their backend was cheap. AI models lack that same benefit. The business model seems to be missing a step 2.
Users are not a moat because there is no network effect here.
yeah, ~1B active users + when non-tech people think of AI, they think of "ChatGPT" not many of the competitors.
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A moat is something that can't be crossed. User count doesn't seem that insurmountable.
How many users did Netscape have?
How do you think this compares to Google and the AI search?
99% of those 1B have negative value.
You're parroting misleading "monthly/weekly active user" numbers from OpenAI that include free accounts.
It's much more important to look at "paid." Only up to 50M (est.) are paid with a substantial chunk (10M) as enterprise/edu/promotional paid accounts.
700 million and declining with no clear story to levering either the attention economy or paying
I can’t. I think they are one viral TikTok away from the pendulum swinging to Chat Gemini, which for most people, the no cost version is perfectly adequate
Yep, I moved my day to day chat to Gemini and my code stuff to Cursor.
Netscape didn't have ridiculously high overheads?
Netscape had 20 millions active users at its peak, out of 6 billions humans.
ChatGPT has 800 millions monthly active users currently, out of 8 billions humans.
Would love to see the numbers on whether there are more people “online” now than when Netscape was at its peak.
They are in bed with Microsoft not against them. And Nadela is not the sharpest knife in the drawer unlike Bill Gates.
Ok where is the Microsoft explorer of this “Netscape”
Gemini is a pretty spot on comparison. Google is putting in front of users at every opportunity. And Gemini is a way better product than IE ever was.
$110B at $840B post-money valuation for OpenAI vs
$30B at $380B post-money for Anthropic announced two weeks ago
This does not increase my confidence in OpenAI's future
Well Anthropic has said (a fairly weak but clear) no to DoW, I wonder who will say yes?
https://www.axios.com/2026/02/27/altman-openai-anthropic-pen...
> Sam Altman says OpenAI shares Anthropic's red lines in Pentagon fight
90% chance it's all PR but who knows
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This should probably change to https://openai.com/index/scaling-ai-for-everyone/ which has more details.
> Today we’re announcing $110B in new investment at a $730B pre-money valuation. This includes $30B from SoftBank, $30B from NVIDIA, and $50B from Amazon.
Thanks, I've added that link to the toptext as part of merging a bunch of these threads.
We try to avoid having corporate press releases as the top-level link, though of course there are exceptions sometimes.
The tweet storm has a bit more substance
e.g. it talks about running NVIDIA's systems (?) on AWS
> NVIDIA has long been one of our most important partners, and their chips are the foundation of AI computing. We are grateful for their continued trust in us, and excited to run their systems in AWS. Their upcoming generations should be great.
Probably something like NVLink Fusion. AWS has been doing deals with suppliers for which the smallest unit of deployable compute is a 44U rack (e.g. Oracle), so this is more of the same.
https://www.nvidia.com/en-us/data-center/nvlink-fusion/
Hard not to hear the word “bailout” in my head when I see this many billions being tossed around.
At least investors like Amazon can afford to lose their investment ($50 billion). That would be like a normal person losing a few thousand dollars. It hurts, but life would go on.
That’s still $100B unaccounted for, and I’m pretty sure Amazon would expect fair treatment if other investors get a bailout. More likely, OpenAI is the one to receive the bailout, likely at the behest of the bigger investors, Amazon included.
That's why there's been such a massive effort to position LLMs as critical to national security. If they can make themselves big enough and critical enough (even in just perception) to the government they won't let them fail. They'll let individuals lose their livelihoods of course, since it's rugged individualism for all of us lowley normal people. But corporate socialism will keep the big players afloat.
Hopefully this will allow them to continue to provide me unreasonable amounts of compute for €20/month. Enjoying it while it lasts…
> Hopefully this will allow them to continue to provide me unreasonable amounts of compute for €20/month. Enjoying it while it lasts…
I'm getting unreasonable amounts of compute for $0/m. I have ChatGPT, Claude, Gemini and Grok in different browser tabs. When one runs out, I switch to the next.
Any other recommendations are welcome.
I feel the same. I can't believe the amount of shit I am throwing at Codex for a measly 20€.
Welcome to Claude Code;
200 USD at Claude, versus 3000 USD (literally) at Gemini. Well, then it will be Claude.
If tomorrow Claude is 5000 USD, well, then it will be Gemini.
Replace "claude code" with "fentanyl" and reread.
This is what is called the drug dealer tactic. Once you need AI they will all cartel and you will pay half your salary (or your boss does) for it.
Have you tried to cancel recently?
Might save you €20 next month.
Not sure why this made people sad.
If you try to cancel they just straight up give you a month for free. Take the VC money....
This right here is the right attitude.
Use these freebies/relatively cheap tools up 'whilst stocks last'.
I personally managed to create a very high quality marketing promo vid using grok. After spending weeks of enduring a lot of pain. But I saved myself tens of thousands.
I took advantage of 30 Grok premium subscriptions that were given to me via a free trial. There's no doubt the cost of services I took advantage of is in the tens of thousands.
But what do I care? I get what I want and then I get out before the freebies disappear.
LOL at the cry babys down-voting. Get mad bruh, get mad.
So let´s see if I understood well this one: Got 110 Billions with the promise that either AGI will happen soon (:) or going public before the end of the year. Eitherway you get to double your 110 Billions no matter what (who will be left to pay the full bill after it, public or public)?
Very interesting, I will follow it closely, mostly to see how you ROI 110 Billions in a couple of years.
Without circular investments and valuations what would Open AI be worth? 100B? 300B? Entirely on revenue alone it seems like 20B. Current valuation appears to be two orders of magnitude off.
Let the retailers decide this year at IPO! The heavy bags must be carried by someone
Is this really the con? Be part of the in-group and buy pre-IPO shares to dump them on joe-six-pack shortly afterwards?
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Well technically "Open""AI" is a SaaS company. It should be worth almost nothing due to AI being able to code AI (AI training is probably the simplest enterprise code).
>Without circular investments and valuations what would Open AI be worth? 100B? 300B? Entirely on revenue alone it seems like 20B. Current valuation appears to be two orders of magnitude off.
They just passed $20B in revenue, you can't really expect a company with this much hype and traction to have a 1x multiple.. that's not to say a 35x multiple makes sense either.
> $20B in revenue
All I see everywhere is "OpenAI generated $13 billion in revenue in 2025" and it just cost them $8 billion. $5B loss in 2025 and projections of losing $14B this year.
There's this saying that if you owe the bank a million dollars, you have a big problem, but if you owe the bank 100 million dollars, the bank has a big problem.
Is the same thing true for corporations? At some point the numbers are so wild the entire economy must help you succeed? I don't mean "too big to fail" exactly, more like "so big eventual success is guaranteed at all costs"
Those are the same thing. The whole point of saying "too big to fail" is to evoke the moment in the housing crash where governments largely threw most of their citizens under the bus by bailing out banks rather than homeowners for the banks' wildly irresponsible decisions. "Too big to fail" means the government steps in and bails you out, and that phrase became popular because for many it was the final nail in the coffin for their trust in government
Would the current administration bail out OpenAI?
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I wonder if there is "too big for IPO". Saudi Aramco in 2019 sold shares worth $25.6 billion in IPO. Even offering just 5% of OpenAI to public would shatter that record. Well, unless public isn't actually interested in investing such huge amounts.
And if you owe the bank a hundred billon dollars the entire economy has a big problem.
Amazon hedging $35 billion on an IPO (we know the odds of AGI with LLMs are vanishing small) is concerning. The hedge signals that they think it's a good "greater fool" investment, otherwise they should be happy to take equity in a company they think will be stable/profitable.
Depressing to see trillions sloshing around, and yet no jobs to be found.
The jobs are going to be mining coal, mining rare earth, building nuclear reactors, building data centres etc. You may need to move to asia to get the job.
Progress!
I wish I could’ve lived and died one or two decades ago. Or better yet never even been.
Yeah and who is going to foot the bill when this comes crumbling down?
Surely some workers are needed to build the chips, hard disk drives, datacenter, and power plants.
Feels like my cheese has been moved
I have no idea what your sentence means (as a non-English native) but I feel you.
Such a waste of burnt money that could be used for more useful projects.
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Oh my gosh. I was hoping that book had died a terrible death...
There seem to be plenty of jobs in SF. Although you’ll most likely end up working on some AI bullshit.
Contact me: https://news.ycombinator.com/item?id=46867010
Note: I need work, not interviews. ;-)
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Less than a decade ago companies reaching 1 trillion was still every much "out there". Now we have an IPO at almost 1 trillion.
It's clear that the stock market cannot be considered normal anymore, held up on hopes at prayers at best.
Sure it can. The value of the dollar coincides with stock market valuations.
Exactly. A devalued dollar means higher number without adjustment
"UBS downgraded the US stock market" happened today for a reason and you're implying that the US dollar lost 1000% of it's value since less than a decade ago? 1/10th of what it is worth today?
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Well, it's still VC market right now, and all the investors have vetted interest into the music not stopping.
What would really help is knowing the details of such funding. The hierarchy of who gets paid first in event of going under is very illuminating and while I am not a banker I always wonder if there are caveats too complicated even for the large investors to understand
HN told me OpenAI was on the verge of collapse.
I don't know that OpenAI specifically is the weak link but this definitely adds to the argument that the entire sector is a wash with the same three or four companies passing around the same $50B over and over. OpenAI is just the link that seems most likely to break first.
I've subscribed to a few AI tools for the last 3 years now. I'm someone who almost never subscribes to anything.
I'm sure that $50b has my money in there somewhere.
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I've seen this sentiment (OpenAI collapse imminent) a lot on Youtube and Reddit, but it somehow evaded me on here
Bad comments about OpenAI's long-term viability I've seen plenty here. But that's not the same as the people predicting one of the hottest companies right now will somehow suddenly run out of cash all on its own
Its hottest service by far is completely free, the vast majority of users of its free service aren't converting to users of its paid services (and often stop using the free service too because they were just tourists seeing what all the fuss was about, or they were compelled to use the free service by their employer), and its data center plans are an impossible money pit.
The fact it's become a household name internationally (giving it the appearance of success) can't save it from spending dramatically more money than it makes. It's been coasting on investments, but it's not even close to being actually profitable.
Huge or well-known companies have collapsed before, even though - because people become so used to them existing - it never quite feels like it will actually happen until it does.
I don't think they are going to collapse. But it was only a couple of years ago that many people thought OpenAI had a big (some thought insurmountable) lead in a race to dominate a winner take all markee. Some people did correctly state that OpenAI had no moat in those days so credit there where it's due.
Now it's looking like a competitive blood bath where ever increasing levels of investment is needed just to main market position. Their frontier models are SOTA for 4 weeks before a competitor comes and takes the crown. They are standing on much shakier ground than they were 2 years ago.
A competitive bloodbath plus OpenAI has investment valuing it like it will achieve agi rather than (merely) being a huge advancement in computing, but not a fundamental rewriting of how all work is done.
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If nobody invested in OpenAI how long could they keep the lights on? They're not profitable yet, and a lot of the wealth that Sam Altman seems to be making revolves around strange circular deals.
By comparison, Anthropic is projected to break even in 2028. Google's Gemini is already profitable.
What source do you have the Gemini is profitable? Are you referring only to the chat app, or to Google'a AI Ventures division? Or including Google Cloud AI related revenue?
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Interesting. I’m having anything on Gemini being profitable though, do you happen to have a source?
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Nobody saw coming the huge demand for coding agents. Not even OpenAI or Anthropic themselves. Those were side projects just a year ago and now dominate token demand. And they keep rising.
Oh I do think they did see it, considering how good they are they've probably been a tuning focus for a while.
The signal the agent usage is sending though is that Anthropic is way ahead since all we hear about is Claude these days despite OpenAI spending so much more money, Antrophic is also out trialling vending machines,etc.
ChatGPT apart from generating text was a bit of a query/research tool but now that Google has their AI search augmentation shit somewhat together I'm not feeling much need for ChatGPT as a research partner.
So now the big question is, with coding and search niches curtailed, where will OpenAI be able to generate profits from to justify their insane spending?
Does anyone see the demand for coding agents that aren't subsided 90% by the AI company?
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the $30b investment from nvidia is instead of a previously-announced $100b investment from nvidia, so it's not like this is an entirely good-news story for OpenAI.
How much revenue have they generated? How about profit?
If investors keep throwing obscene money at OpenAI, sure, they can stay afloat forever. Can't argue with that. But if we're talking about a sustainable business, I still don't see it.
You'll always find someone claiming X or Y are close to collapse at any given time. As even a broken clock is right twice a day, eventually one of these predictions will randomly be proven correct. That person will then be elevated to a genius forecaster and rake in cash for a decade or two.
Actually it is the other way around; every upstart claims that their invention is the mostest revolutionariest thing ever. 99.9% of them are not. The nay sayers are right most of the time.
Recent high-profile examples include Segway, NFT, Crypto as a whole, pre-tranformers voice assistants and various "Design Thinking" projects like those Amazon prime buttons.
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Thiel said around last autumn that AI is a bubble and exited Nvidia. Nvidia is now falling despite good earnings.
If OpenAI keeps getting circular financing, of course they will not collapse yet.
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For Nvidia's part they're just giving money to one of their largest customers. They make money back even if they "lose" the bet
It's like government XX giving "help" or "grants" to countries at war so they can purchase weapons from XX.
Selling Shovels is quite lucrative whether there is an actual mining business or just a gold rush.
At one point Jensen Huang will be out (retired or forced by staginating sales) and can definitely look back on a very successful career. That much is certain.
Well, $110B a year doesn't last long if you are losing $40B a quarter.
Also Softbank invested, which is never a great signal.
That's mean.
They also invested in Uber
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This is simply a symptom of economic misallocation, decades of wealth concentration has moved the incentives away from normal healthy investments, to a minuscule minority desperately trying to chase ever shrinking short term gains, when all they are really doing is gambling on hooking the next tech evolutionary whale.
So much human potential given to such a tiny group of incompetent morons.
When the history books are being written, this era will make the robber baron/gilded age pale in comparison.
We live in the golden age of the grift.
SoftBank? The music must be stopping soon, hold onto your butts.
What's the meme with SoftBank? Just that they're super bad at investments?
Ya. The WeWork debacle and investing $300 million into Wag, an imploded Uber for dog walking, surely wasn't helping.
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What? SoftBank has been investing in them repeatedly for years now.
Lot of skepticism about OpenAI's survival. I am a user of both Claude (max) and Codex (plus). Some neutral points.
- Anthropic owes to AWS for their enterprise growth. Yes, their own talent as well.
- AWS investing for a purpose - solving problems with multi-agent systems - "exclusive third-party cloud distribution provider for OpenAI Frontier, which enables organizations to build, deploy, and manage teams of AI agents.". I think the multi-agent landscape will be production-ready in 2026 for solving really complex problems. AWS saw something in Codex and OpenAI's models.
- On Circular investments - if you make $100B of your revenue from ecosystem of players who spend $50B on your infra... where else would you go?
I work for another cloud provider, not AWS.
$730B pre-money is remarkable context for an industry that barely existed commercially a decade ago. Worth noting the implied revenue multiple here - OpenAI reportedly hit $4B ARR in 2024, so this round prices them at ~180x forward revenue. For comparison, Salesforce peaked at ~12x. The bull case obviously requires AGI-level defensibility that makes traditional SaaS multiples irrelevant. The bear case is that frontier model costs continue compressing (DeepSeek effect) and commoditization erodes the moat before the network effects lock in. Either way, this is a defining data point for how markets price transformative but uncertain technology.
These are geopolitical activities akin to the arms buildup of the Cold War, but happening somewhat more openly through the guise of private sector investments. The names of the companies involved are ephemeral. The numbers "invested" are largely imaginary, just play money pumped into the system over the last few years, flowing around, searching for a place to park. The result will be a certain amount of tangible infrastructure in the form of datacenters, power plants, semiconductor fabs. It's a Hail Mary move to keep pace with a certain geopolitical competitor. This process may propel society to the next level or may collapse it, depending on how society chooses to use these resources and how successful the competitor is at its own similar endeavor.
Just weird to read. "pre-money" implies startup, and 730B implies worth more than a good chunk of SP500
$730B on roughly $11B ARR is ~66x. Microsoft trades at 12x. The market is pricing OpenAI as infrastructure, not software. That's probably right. The implication is that the productivity gains accrue to whoever controls the infrastructure layer. The workers and companies building on top of it are taking the displacement risk without the upside.
Infrastructure is replacable and a race to the bottom though.
If OpenAI fails, you just change the endpoint URL and API key in your software.
> We continue to have a great relationship with Microsoft. Our stateless API will remain exclusive to Azure, and we will build out much more capacity with them.
This sounds a bit like going forward (some) OpenAI APIs will also run on platforms other than Azure (AWS)?
Anyone knows more?
I guess Amazon would have a hard time justifying their investment if OpenAI remained Azure-exclusive...
https://openai.com/index/amazon-partnership/
Curious what is meant by "stateless".
OpenAI desperately needs to be available outside Azure. We are exclusively using Anthropic atm because it is what is available in AWS Bedrock and it works. These things are solidifying fast.
Unless I'm mistaken wasn't someone at Microsoft suggesting they would just develop their own models soon?
What's the math here if they go public in 2027, with next to 1T in valuation? How much more growth can the company have for regular investors? Surely they won't have the capital of multiple FAANG companies...
Wow! This is circular financing. Sharknado, Altnado….
Nvidia will get all that money back via GPU purchases, Amazon via cloud rental and SoftBank is being typical SoftBank - a rich but not particularly bright kid in a class :) .
"I give you $30 billion if you use it to buy $30 billion of stuff from me" doesn't sound like a very good investment. Is Nvidia expecting more back than it puts in? Enough more to make the deal profitable?
Or is it just to keep Nvidia from crashing?
"I give you 30B$ worth of hardware that costs me <10B$ to make in exchange for 30B$ worth of shares in your company" would be a more accurate description.
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Well, I won't pretend I know the answer :) . But I assume that a) they are partially betting on making a normal return on investment (i.e. OAI not crashing), b) they profit from running a huge expense/revenue cycle (a company making say a million of profit and having a billion revenue is favored better than the same but with only ten million revenue), and c) even if all goes wrong, it is still better to get back most of the investment even if not everything and zero profit, compared to a possibility of just losing it all like SoftBank or other investors.
I'd say the latter. Right now AI is Nvidia's biggest consumers. If any big AI company crashes, they'll lose a lot of money
In the end it's exchanging GPUs for OpenAI shares. It's not a non-trade, and in the current market Nvidia could really sell the stuff for cash. The marginal cost is very much sharply positive.
$30B in sales is worth more than $30B in stock appreciation...
I love how people think the company that basically invented ai is going out of business. Clearly OpenAI is a massive success and will continue to be
That’s what my Uber told me last night, not sure how he was able to get his hands on some stock!
"Basically invented AI" by running on principles that Minsky wrote about in the 80s, and improvements Google developed in the early 10s, on bigger and bigger computers. But "Basically invented".
Is OpenAI giving employees RSUs? What good are those under these astronomical valuations?
Presumably it’s all relative. Apple gives me RSUs with a much higher valuation (although at least it’s on the public market already).
they have PPUs
No it's RSU now. But idk if anyone would want to join OpenAI at these levels. Are they really a $1T business?
At least Anthropic has some runway in terms of valuation and isn't bleeding all over some free tier.
ChatGPT needs to catch up hard, for me their model is unusable and I cancelled my subscription 5-6 months ago, so to me this post is hot air. I need to see results, going back to try Codex 5.2, then 5.3, downloading their new desktop client, their VS code extension, their weird browser, is time I wish I had back.
This seems very risky and worse is that there is a good chance our money will be used to bail them out.
Interesting story for sure (to be clear I'm not talking about the writing by Reuters), but would you buy or skip the OpenAi IPO?
To me it feels like one of those throw some play money into it and see what happens sort of situations. Expect it will return negative due to the raw financials and outlook, but small chance the brand carries enough weight with the public that it spikes.
I'd love to hear other thoughts though
If the IPO was at 20B maybe I could throw a 1000$.
But at such numbers it's nonsense.
I don't see any moat. LLMs are commodities.
Enterprise is on Gemini/NotebookLM and Copilot as it's a natural extension of the Google and Office suite they use.
Devs are in Anthropic camp, but they will jump as soon as they can save 90% of the money for 99% of the output.
> The Information had previously reported that $35 billion of Amazon’s investment could be contingent on the company either achieving AGI or making its IPO by the end of the year. OpenAI’s announcement confirms the funding split, but says only that the additional $35 billion will arrive “in the coming months when certain conditions are met.”
Incredible.
So basically, Amazon is buying into the IPO at an early price. Maybe this is the time to divest from MSCI world. I don’t want to be the bag holder in the world’s largest pump and dump.
It can both be true at the same time: That AI is going to disrupt our world and that Open AI does not have a business model that supports its valuation.
Tesla is a car company with relatively small, and shrinking, sales, that is worth $1.5T on the promise of [Elons_Promise_of_the_Month]
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Did it ever occur to you that an entire generation of developers are going to retire in less than 20 years? They are betting that the software industry will be autonomous. Really, think of our industry like AUV phenomena. We’re the drivers that are about to be shown the door, that’s the bet.
World will still need software, lots of it. Their valuation is based on an entire developer-less future world (no labor costs).
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Exactly, the dot com bubble didn't mean that the internet was just a fad.
I'm curious how they define AGI technically. Seems like you would want that to be a tight definition.
Didn't they already define it as "a system capable of generating at least $100 billion in profit"
It just needs to be anything that will force OpenAI to IPO.
I'd love to know how they define AGI.
They've previously defined AGI as an AI that can directly create $100B in economic value.
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Altman Gets Investment?
Obviously in a way they get the $35B.
Hopefully Microsoft is selling parts of their share of this trash into these funding rounds...
Their users are there as long as they have the money to fund the pro plans for free to the users. Which is not a long term solution
Please excuse my finance illiteracy. What's pre-money valuation?
Okay, I can understand investment from SoftBank, and maybe somewhat from Amazon (if they plan to use OpenAI's models), but investment from NVidia who will then sell OpenAI the GPUs with X% markup doesn't make sense to me.
Puff puff until it pops!
Everyone thinks this bubble will continue until AGI(bulls) or until someone calls them on it(bears). I think it will continue until someone finds a quick way to make cheap energy(bullish) or until we can't build more power plants to support AI growth(bearish).
While nothing fancy has happened yet in the area of cheap energy, there is still enough power around the world to build AI data centers. The problem is this power exits in countries that the West has decided, many times for good reasons, they don't want to deal with their leaders.
I'm predicting that over 2027, either the US will become more aggressive in making war with these countries or company CEOs will start developing "reality-distorsion-fields" around them and decide having enough power for the next datacenter is more for the good of humanity. Before that Europe will decide that AI training on human faces(eg. of non-Europeans) is not really a problem and will allow US companies to train their models in EU countries.
The bubble will continue until the FED stops printing or the dollar sees enough inflation that the printing becomes meaningless.
Right now the US seems to not have a lot of inflation and the FED has every reason to print. So don't expect a burst, but this can change in a blink.
Remember when OpenAI sold half of itself for $10B?
So many things are going on man, The Ai system is only broken.
What is nature of money invested?
What is mechanism of getting returns?
mark my words, the entire stock market will need to float until openai goes public.
there is no way openai - and players who are vested them can afford market to tank before it.
and they say its not a bubble! we saw it with oracle deal, big announcement and than nothing, same with nvidia and now same thing is going again i hpe this is cash infusion and not some credit deal.
I this $110 Billion more or just $110 billion historically?
More
Does this mean they won't IPO this year?
That's a pretty lofty valuation for a company that has yet to demonstrate code generation anywhere near Anthropic's models if they're leaning into the engineering angle.
By what measure do you think they're not anywhere near Anthropic's models?
I dont see much of a difference betwen Claude,Codex and GLM with OpenCode. Any on them, nowadaws, works really, really, well.
Many engineers use Codex 5.3 and find it better, including Hashicorp's Mitchell.
i find codex 5.3 roughly on par with (though tbh still not quite as capable as) sonnet models, which are not even anthropic's flagship model family.
And the OpenClaw guy
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My guy, it's a tradeoff of autonomy vs thoroughness. You might not enjoy using the codex models, but to say they're way worse than claude is an error.
"Calvinism makes pretty lofty claims for a religion who has yet to demonstrate soul salvation anywhere near Lutheranism if they're leaning into the reformation angle"
- Someone in the 16th century, probably
It’s Tesla only big tech are the suckers.
I guess no GPT on Bedrock still it seems
They announced more OpenAI models coming to bedrock.
The round is still open, Amazon is funding in tranches, and Sam doesnt get all the cash until he hits unknown metrics. Sounds like a down round.
What are they going to do with it?
Google has enough momentum at this point to make the startups technically irrelevant, and they've only just started speeding up. Arguably they've already leapfrogged Anthropic and OpenAI in every field that matters, infrastructure, distribution, price, verification, all google, enterprise and actual model intelligence, currently a toss up but google is improving the fastest, SOTA in so many categories eventually this will coincide with the FOTM.
730 Billion certainly is a bubble that will pop sooner or later.
Only $730B? Why stop there? As long as we're making stuff up, let's go big. What about $10T?
They have to save the big T for IPO.
On a tangent, I remember companies like Slack triggering the unicorn craze. They said that it was just better to aim for a billion than some number like 900M or 1.2B, because psychologically, it meant more to employees, investors, and customers.
OpenAI is in that place where nobody really cares for these mind games. It's not very reliable. But it is useful enough to pay for. It's cheap enough to be an impulse purchase where some guy decides to just subscribe to ChatGPT because they're working on an important slide or sketching a logo.
Rookie numbers, I say $100T. Go big or go home.
https://paintraincomic.com/comic/first-date/
Remember when it was a huge milestone when gigantic companies like Apple and Microsoft were striving to be the first $1T company backed with decades of building actual businesses with actual profit?
Good times.
You have to make it look semi-realistic
Burn baby, burn!
BTW, real money or credits?
The best part of this post is learning about xcancel
Feels like Nvidia getting in the game here might just put them at more risk. If things don't work out they'll be out their money and future sales and so on.
It is bad enough AI sucked up so much investment money, hitting companies that do make profitable things hard if AI bubble collapses would be bad...
Ok, I'm getting out.
Source: https://news.ycombinator.com/item?id=47180302)
I thought with OpenClaw they'd get more than a 3.67x multiplier of what Anthropic raised.
Source: https://news.ycombinator.com/item?id=47180302)
$30B from Nvidia… so the investments are locked in circular dependency. Great for the economy.
This implies any actual investment took place, which would be an innovative break from the typical scenario with AI firms.
Oh the "investment" is definitely taking place on paper. Whether any money actually changes hands... doubtful.
This time, does the $100B actually exist?
https://www.inc.com/leila-sheridan/nvidia-is-wavering-on-its...
What's the statue of limitations for securities fraud? The current administration won't last forever.
Circular economy money
Normally, there's at least a locked suitcase full of newspapers racking up frequent flier miles...
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Definitely with regard to Nvidia.
If you make a billion but only pay $2M for a pardon it might be worth it: https://www.independent.co.uk/news/world/americas/us-politic...
> This time, does the $100B actually exist?
Nope. That 100B is in "promises" for over several years in total.
They have $15B out of the $50B from Amazon right now.
> The current administration won't last forever.
This is why OpenAI must IPO and when it does, I won't be surprised that a crash is followed up before 2030.
By then, they will "announce" "AGI" (Which actually means an IPO)
> By then, they will "announce" "AGI"
It’s already a joke to call the slop generators “AI”, so giving it another fake name won’t really make much of a difference any more. Nothing short of a miracle will be able to top the “creative marketing” we already have.
Oh; good point. The great economic crash of 2029+ will be caused by the democrats cleaning up Trump's mess. (Sort of like "Biden's" inflation.)
Great, now when are memory prices going to go back to normal?
Don't worry, if it all comes down, you'll be able to buy RAM and GPUs by weight.
OpenAI's just trading equity for GPU credits at this point?
Taking the circular deals up another magnitude?
Big number gets bigger
Our economy has turned into an ouroboros: a circle of snakes shitting in each others mouth until they get so sick we the taxpayer will get the privilege of bailing them out. I'm really fucking excited to eat shit for the 3rd time in 18 years. Super pumped.
Kind of leaving out a lot of detail there:
- Amazon's $50B is only $15B, with the rest being "after certain conditions are met", whatever that means (probably an IPO, which isn't happening)
- The $30B each from softbank and NVIDIA is paid in installments
So this is more a $35B fundraise, with a _promise_ of more, maybe, if conditions are met. Not _bad_, but yet more gaslighting from Mr Altman. Anyone reporting this as a closed fundraising deal is being disingenuous at best.
> - Amazon's $50B is only $15B, with the rest being "after certain conditions are met", whatever that means (probably an IPO, which isn't happening)
Startup funding is often given in increments depending on milestones being met. Most startups just don’t announce that it’s conditional.
For large funding rounds, nobody gets a check for the full amount at once.
The funding would not be conditional on an IPO because that wouldn’t make any sense. The IPO is the liquidity event for the investors and there’s no reason for a startup to take private investment money that only enters the company after IPO.
This is pretty standard. Usually the conditions are performance benchmarks, but may also include IPO. Typically its done in multiple tranches, e.g. 15B at the start, 5 more if you gain +500m users, 5 more if your profit exceeds X, and the rest for IPO (im over simplifying)
The conditions are either an IPO or achieving AGI. I’d be curious to know how the contract defines AGI. If I recall correctly, the OAI-Microsoft deal just defined it as “AI-shaped tech that can generate $100 billion in annual profits”, which I think is actually close to the correct answer, insofar as we will have AGI when the markets decide we have AGI and not when some set of philosophical criteria seem to be satisfied.
> If I recall correctly, the OAI-Microsoft deal just defined it as “AI-shaped tech that can generate $100 billion in annual profits”, which I think is actually close to the correct answer
So if they hit 100 billion annual then it's AGI but if Kellogg's launches “FrostedFlakes-GPT" and steals 30% of the market it's no longer AGI at 70 billion?
Not to nitpick but to expand, many funding deals (pretty much all above 100M) are structured like that.
You'll never get a billion dollar check from anyone.
I've even seen startups raise like 500k pre-seed with tranches in it, lmao!
nit: I think you mean tranches
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*tranche
There is not a single OpenAI model in the top 10 on openrouter's ranking page. The market is saying something about the comparative value of OpenAI.
Edit: yes, it is true that many people do integrate directly with OpenAI. That doesn't negate the fact that Openrouter users are largely not using OpenAI.
Methodology problems aside, do we have any idea how big OpenRouter is as compared to the big providers?
OpenRouter claims "5M+" users; OpenAI is claiming >900M weekly active users.
I don't really think it's possible to learn anything about the broader market by looking at the OpenRouter model rankings.
Agreed it's not really good signal (many sampling biases) but user count is not relevant, most money is from heavy API users. 900M users with free or cheap subscription are nothing compared to even 10k heavy API users.
On the other hand, big users don't use openrouter. At $work we have our own routing logic.
1. openrouter is API usage. There is obviously consumer side
2. people often use openrouter for the sole purpose of using a unified chat completions API
3. OpenAI invented chat completions; if you use openrouter for chat completions often you can just switch your endpoint URL to point to the OAI endpoint to avoid the openrouter surcharge!
4. Hence anyone with large enough volume will very likely not use openrouter for OpenAI; there is an active incentive to take the easy route of changing the endpoint URL to OAI’s
This could just be because everyone is using direct OpenAI api keys when using OpenAI.
> The market is saying something about the comparative value of OpenAI.
Is it?
At what point are the models going to all be "good enough", with the differentiating factor being everything else, other than model ranking?
That day will come. Not everyone needs a Ferrari.
Edit: I misread the parent, I think they're saying the same thing.
Model rankings are irrelevant. No one cares.
The differentiating factor will be access to proprietary training data. Everyone can scrape the public web and use that to train an LLM. The frontier companies are spending a fortune to buy exclusive licenses to private data sources, and even hiring expert humans specifically to create new training data on priority topics.
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> At what point are the models going to all be "good enough", with the differentiating factor being everything else, other than model ranking?
It's already come for vast swathes of industries.
Most organizations have already been able to operationalize what are essentially GPT4 and GPT5 wrappers for standard enterprise usecases such as network security (eg. Horizon3) and internal knowledge discovery and synthesis (eg. GleanAI back in 2024-25).
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Or, their customers integrate with them directly.
Sample bias.
so the AI bubble is far from gone right ????
Circular-breathing causes the air to heat up, causing expansion. This is how a balloon can expand even when someone is breathing air from inside it.
s/breathing/investment/g s/balloon/bubble/g s/air/money/g
I performed the suggested substitution. What is the heating up of money in that analogy?
Sarcastically, it's "the vibes intensifying".
(Vibes ~ Vibrations ~ Heat)
Tbf it's a reasonable question... I think it's a little tricky to pin down the equivalent of "kinetic energy" in purely economic terms, though you might look at the rate of flow of money as some analogy for the speed/energy of particles (speed of individual dollars changing hands). In that sense, the more frequent and larger these deals get, the hotter the market is. This is not a novel analogy.
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Two economists were walking down the street when they spotted a giant dog turd on the ground.
One of them wanted to have some fun, so said to the other - "I'll give you $100 if you take a big bite of that turd".
His colleague figured $100 was a good chunk of cash, so did the deed. Feeling thoroughly humiliated, he pocketed the $100 and they carried on.
Further down the street they came upon another turd.
The angry economist now wanted revenge so made the same proposal back to his colleague, who also agreed and took a bite of the turd, earning back his $100.
Later one of them said to the other "you know, I can't help but feel we both ate shit for no reason."
His collegue replied "what do you mean? We raised the national GDP by $200."
The number is irrelevant. The fact is that work was done and was repaid with work.
Money was just the means of the transaction.
work good even if work literally eating shit
surely that behavior leads to a good society and doesn't encourage nefarious behaviors
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> We raised the national GDP by $200.
Seeing this phenomenon, a silicon valley entrepreneur get an idea with the following sales pitch:
"Turd-bars that will make you the fittest version of yourself , answer all your deepest questions, and take you to the promised land (mars)."
Surprisingly, the turd-bars sell well, and GDP rockets up. Meanwhile VCs with fomo are funding its competitor: the shit-sandwich.
I did upvote, it's witty, but it's a bit of a misrepresentation of how the economy works.
In practice, people don't tend to pay people to eat shit without gain. You are paying people to help you. Money gaslights everyone into helping each other, the most selfish people become the most selfless.
Of course, real capitalism is much more complex and much uglier than this fantasy. When certain people end up with long-term control of large piles of money, the whole thing gets distorted. They get to make lots of money on interest without doing anything, and making other people eat more shit for scraps. That's the "capital" part of capitalism.
But the toy world-model that this joke is making fun of, is actually the one core positive aspect of capitalism and brings all the prosperity we have: tricking people into helping each other.
> the most selfish people become the most selfless
You reminded me of this Stewart Brand quote:
> Computers suppress our animal presence. When you communicate through a computer, you communicate like an angel.
I scratch your back for a $10M IOU.
You scratch my back for a $10M IOU.
The debts cancel out.
How is the economic gain calculated?
If OpenAI is Pied Piper, who is Russ Hanneman in all this?
I would vote for Once-CEO-Then-not-then-CEO-Again Hypeman Sam Altman
I like to point out that he was fired for egregious dishonesty.
Jensen Huang? He put GPUs on the internet!
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"Don't be curmudgeonly. Thoughtful criticism is fine, but please don't be rigidly or generically negative."
https://news.ycombinator.com/newsguidelines.html
It’s not craze. It’s technology shift. Bitcoin and 3D printing were craze. It’s like a move from analog photography to digital. I am telling you this as a very conservative person. Even for me it’s helpful.
3D printing is helpful too. The infrastructure created during the dot-com bubble of the late 1990s was also helpful. The UK is still profiting from the railway infrastructure created during the railway craze of the 1840s (https://en.wikipedia.org/wiki/Railway_Mania). The question is just how much of the valuation of AI companies is because they are useful and how much is speculation...
3D printing has a CAGR of 18-25%, not exactly 'were craze'
> 3D printing were craze
That's certainly a take, industry loves it. Sure, all that "everybody will print widgets at home instead of going to the store" stuff was never going to happen, but 3d printing is nonetheless here to stay.
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It can be both a craze and a technology shift. AI isn't going away, it will transform some industries. But right now it's overhyped, overfunded and due a trip back to reality.
It most definitely COULD be a craze from the perspective of scope of investment, societal impact and timing. No one surfing the crest of this wave could be described as "conservative".
So how much are you willing to pay for it?
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> It’s not craze. It’s technology shift.
It is a bubble with extreme levels of debt + funding from too many promises from companies that are in these sort of rounds.
People being consumed by the hype will also be completely consumed by the crash.
Comments like this is exactly how a 2000 and a 2008 style crash will happen.
> Bitcoin and 3D printing were craze.
What bitcoin gave us essentially? Huge pump and dump schemes coordinated by big hands? Crypto investments which made 95% of investors poorer? What's left? Maybe 0.01% of it was beneficial.
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"This time it's different!"
Does anyone have any ethical concerns using openai regarding money donated to the current US administration in one way or another? I will search for more accurate details about that situation. I know about several other ethical concerns with openai that people have, including copyright and other considerations regarding the work being trained on, as well as lack of action regarding users who are harmed by their usage of the product, often regarding mental health, environmental concerns, actually quite a few others, but I am interested if many people think their political donations are an issue or not.