OpenAI could reportedly run out of cash by mid-2027
tomshardware.com
tomshardware.com
Edit: Startup might be the wrong term but Uber raised money every 18months at least for 10 years till it was finally profitable in 2023. My point is more that saying an unprofitable but massive company only has 18months of cash isn’t a new development. The new development is that the 18 months of cash is an order or two of magnitude more than prior companies.
Post-1993, a Wikipedia search for "tech startup" redirects to the page for "startup company". Interestingly, it contains a reference to YC
The definition of "startup company" provided relies on a single reference to a 2013 Forbes article
https://web.archive.org/web/20131217064510if_/http://www.for...
What does "tech startup" actually mean. Is there a concise, unambiguous definition
Putting aside the ambiguous term "tech", why not just use the term "company"
The term "company" can be defined concisely as, e.g., "an association of persons for the purpose of carrying on some enterprise or business". Note there is no need to refer to an example company
Is it possible to define "startup" without referring to an example startup
I understand being bearish and frightened of AI but this accounts for absolutely NOTHING, and especially doesn't include any projections on potential ad revenue which is likely going to be huge given their DAU and what you can extrapolate their ARPU to be based on other big tech advertisers.
Ad revenue doesn't come out of thin air. Unless budgets and TAM in the ad space increase (hint: they won't), the spend has to mostly come from cannibalizing META and Google. In that regard, I wish them luck - that will be a long and bloody battle. And both the established players can fight it longer than OAI because they have actually revenue streams and strong cash balances.
Every doom and gloom article about OpenAI is almost always speculation, with no actual evidence backing the claims. The issue is that people love a good "AI is going to fail" story, so it gets shot up to the front page. Unfortunately, some journalists now know that it can rake in clicks, so they will happily reduce their journalistic integrity to ride the wave.
Chatgpt is mostly worse than Gemeni too (arguably) and isn't nearly as rate limited. So they're already losing users and making their product a worse experiance than their competition.
Sure OpenAI will make some money from ads but will it be anything close to what it takes to quench the amount of money they're burning? It seems unlikely to me. They really need to be bought out by a sugar-momma who can afford to play this kind of game like MSFT.
Just see what is happening regarding Youtube ads. It began in a small way, and it's now unbearable to watch without uBlock Origin
> "Both our Weekly Active User (WAU) and Daily Active User (DAU) figures continue to produce all-time-highs (Jan 14 was the highest, Jan 13 was the second highest, etc.)"
This does not indicate that they're losing users, at all...
https://www.bleepingcomputer.com/news/artificial-intelligenc...
This is assuming they don't build the vertical stack at all which is unlikely given their highly competent product team.
Sometimes these "articles" are sent out as thinly veiled "press releases" prior to an new round of investment. Sometimes someone who thinks they are a "reporter" has what they think is an "exclusive" or a "hot take". Regardless, as someone who has spent all of his career in startups...this is...business as usual. Another round of funding/financing will commence. Open AI will be fine unless investors lose confidence in AI. We won't know how it will play out until it plays out. Media outlets reporting on this are playing off the AI bubble hype for clicks. (Yes, we are in a bubble. No, nobody knows when it will pop, nor how bad it will be, ad driven company just wants more ad revenue, nothing to see here, move along.)
From where? There's not an infinite source of capital. There's already talk of junk bonds, CDS and private credit.
At some point the lenders look like the loan shark/death spiral finance options.
IMO LLMs will be equally transformative for online influence campaigns (aka ads + Cambridge analytica on steroids)
Oh and yeah, AI has already been shown to be more persuasive than the average human. It's only a matter of time before someone's paying to decide what it persuades you of
It better be, it's taken over 40000x the funding.
The question is not whether AI is useful, the question is whether it's useful enough relative to the capital expectations surrounding it. And those expectations are higher than anything the world has ever seen.
A single LLM provider might have been able to get great margins and capture a significant fraction of the total economic output of (currently e.g. junior grade software engineering), but collectively they're in an all-pay auction for the hardware to train models worth paying for, and at the same on questionable margins because they need to compete with each other on cost.
They can all go bankrupt, and leave behind only trained models that normal people won't be able to run for 5 years while consumer-grade stuff catches up. Or any single one of them might win, which may not be OpenAI. Any or all may get state subsidies (US, Chinese, European, whatever).
All kinds of outcomes are possible.
[1] https://github.com/deepseek-ai/open-infra-index/blob/main/20...
Getting rid of frontier training will mean open source models will very quickly catch up. The great houses of AI need to continue training or die.
In any case, best of luck (not) to the first house to do so!
If the models stop being updated, consumer hardware catches up and we can all just run them locally in about 5 years (for PCs, 7-10 for phones), at which point who bothers paying for a hosted model?
This makes sense because Facebook was one year old in 2005 and OpenAI is 11 years old now. Eleven is just two ones so it’s basically the same thing as one so it is sensible to make that comparison
1/ Implement more aggressive advertising 2/ Stop training new models 3/ Raise more funding
The author's prediction is that OpenAI will get bought.
I know it sounds kind of crazy, but there actually is precedent for that: Reid Hoffman sold his AI startup after he realized there was no possible way for an AI startup to compete with the Googles of the world with $100B in cash and giant free cash flow machines given how capital intensive it is to build AI.[1]
To me, it's not that outlandish to think that if OpenAI really does need to spend a ton of money to survive, they will probably have to either raise or get bought (or find that magic money tree by monetizing their business). Because right now, they don't have the cash flow to compete with Google.
Could obviously change, but I think that's where the author is coming from.
Google et al won't stop training new models.
MIT actually carried out a study. Wharton just asked some execs, who of course parroted the party line. Winter is coming.
This is pretty normal for a fast-growing startup, although OpenAI may be the largest to ever do it.