Comment by ctoth | Hacker News Reader

Comment by ctoth | Hacker News Reader

His "$400B in next 12 months" claim treats OpenAI as paying construction costs upfront. But OpenAI is leasing capacity as operating expense - Oracle finances and builds the data centers [1]. This is like saying a tenant needs $5M cash because that's what the building cost to construct.

The Oracle deal structure: OpenAI pays ~$30B/year in rental fees starting fiscal 2027/2028 [2], ramping up over 5 years as capacity comes online. Not "$400B in 12 months."

The deals are structured as staged vendor financing: - NVIDIA "invests" $10B per gigawatt milestone, gets paid back through chip purchases [3] - AMD gives OpenAI warrants for 160M shares (~10% equity) that vest as chips deploy [4] - As one analyst noted: "Nvidia invests $100 billion in OpenAI, which then OpenAI turns back and gives it back to Nvidia" [3]

This is circular vendor financing where suppliers extend credit betting on OpenAI's growth. It's unusual and potentially fragile, but it's not "OpenAI needs $400B cash they don't have."

Zitron asks: "Does OpenAI have $400B in cash?"

The actual question: "Can OpenAI grow revenue from $13B to $60B+ to cover lease payments by 2028-2029?"

The first question is nonsensical given deal structure. The second is the actual bet everyone's making.

His core thesis - "OpenAI literally cannot afford these deals therefore fraud" - fails because he fundamentally misunderstands how the deals work. The real questions are about execution timelines and revenue growth projections, not about OpenAI needing hundreds of billions in cash right now.

There's probably a good critical piece to write about whether these vendor financing bets will pay off, but this isn't it.

[1] https://www.cnbc.com/2025/09/23/openai-first-data-center-in-...

[2] https://w.media/openai-to-rent-4-5-gw-of-data-center-power-f...

[3] https://www.cnbc.com/2025/09/22/nvidia-openai-data-center.ht...

[4] https://techcrunch.com/2025/10/06/amd-to-supply-6gw-of-compu...

Suffice it to say this is not the first time Ed Zitron has been egregiously wrong on both analysis and basic facts. It's not even the first time this week.

I wrote a post about his insistence that the "cost of inference" is going up. https://crespo.business/posts/cost-of-inference/

Finding an audience that wants to believe something, and then creating something that looks like justification for that belief is a method to gain notoriety, which may or may not lead to income. Works doubly well for issues that are "hot" in the public sphere, as you can tap into the supporters and the outraged.

It would be nice if your blog had an RSS feed :)

Thank you. I will add one soon.

Added it!

Solid post, thanks for sharing. Zitron occupies his own echo chamber. I've seen some people share links to his articles with a smirk as a "proof" of how "bullshit LLMs are" — and I know for a fact that they have no understanding of LLMs or how to evaluate limitations, saying nothing about unit economics. Sadly, I don't think it's possible to reason with them.

To be clear, I do expect that the bubble will burst at some point (my bet is 2028/2029) — but that's due to dynamics between markets and new tech. The tech itself is solid, even in the current form — but when there's a lot of money to make you tend to observe repeatable social patterns that often lead to overvaluing of the stuff in question.

OpenAI is currently growing WAUs at ~122.8% annualized growth (down from ~461.8% just 10 months ago).

Assuming their growth rate is getting close to stabilizing and will be at ~100% for 3 years to end of 2028 - that'd be $104B in revenue, on 6.4B WAUs.

I wouldn't bank on either of those numbers - but Oracle and Nvidia kind of need to bank on it to keep their stocks pumped.

Their growth decay is around 20% every 2 months - meaning - by this time next year, they could be closer to 1.2B WAUs than to 1.6B WAUs, and the following year they could be closer to 1.4B WAUs than to 3.2B WAUs.

Impressive, for sure, but still well bellow Google and Facebook, revenue much lower and growth probably even.

They don't need to grow users if their acv increases or they grow their enterprise or API businesses

And of course I might pay $20/month for ChatGPT and another $20/month for sora (or some hypothetical future b2c app)

Codex is my current favorite code reviewer (compare to bug bot and others), although others have had pretty different experiences. Codex is also my current favorite programming model (although it's quite reasonable to prefer Claude code with sonnet 4.5). I would happily encourage my employer to spend even more on OpenAI tools, and this is ignoring the API spend that we have (also currently increasing)

We should also consider the $2,000/month and $20,000/month plans rolling out in the future.

OpenAI don't monetize the vast majority of their users yet. But the unit costs are really low, and once they start monetizing the free tier with ads, they'll be wildly profitable.

"OpenAI cannot actually afford to pay $60 billion / year" the article states with confidence. But that's the level of revenue they'd be pulling in from their existing free users if monetized as effectively as Facebook or Google. No user growth needed.

And it seems this isn't far off, given the Walmart deal. Of course they'll start off with unobtrusive ad formats used only in situations where the user has definite purchase intent, to make the feature acceptable to the users, and then tighten the screws over time.

Except google and facebook have locked in numbers at times of virtually no competition before they started scaling up ads. If Open AI starts scaling ads next year they will churn people at a rate that will not be offset by growth and will either plateau or more likely lose user numbers, as their product has no material edge to alternatives in the market.

I disagree with Zitron’s analysis on many points, but I don’t see Open AI achieving the numbers it needs. Investors backing it must have seen something in private disclosure to be fronting this much money. Or more precisely, I need to believe they have seen something and are not fronting all this money just based on well wishes and marketing.

Most people don't choose by blind taste test. How intrusive do those ads have to get before it overwhelms habit and familiarity? OpenAI might be betting on enough of its 800m and growing weekly users sticking around long enough to moot churn until a liquidity event pays everyone off.

> His "$400B in next 12 months" claim treats OpenAI as paying construction costs upfront. But OpenAI is leasing capacity as operating expense - Oracle finances and builds the data centers [1].

It is bagholders all the way down[1]! The final bagholder will be the taxpayer/pension holder.

[1]https://en.wikipedia.org/wiki/Turtles_all_the_way_down

It's going to be 2008 bailouts again, but much worse.

These companies are doing all sorts of round tripping on top of propping up the economy on a foundation of fake revenue on purpose so that when it does some crumbling down they can go cry to the feds "help! we are far too big to fail, the fate of the nation depends on us getting bailed out at taxpayer expense."

I feel like writing that down somewhere because that's pretty close to how the bailout will be pitched. "If you don't bail us out then our adversaries will get to AGI first and it will be game over". Very clever of them.

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