E.g. what good is 20 billion per year when "OpenAI is targeting roughly $600 billion in total compute spending through 2030". That is $150 billion per year?
Assets are harder to measure. Facebook used to say something silly like every user was worth $100. That sounded ridiculous for a completely free app but over a decade later, the company is worth more than that. Revenue is an easier way of measuring assets than profit.
Profit doesn't really matter. It gets taxed. But it's not about dodging taxes; it's because sitting on a pile of money is inefficient. They can hire people. They can buy hardware. They can give discounts to users with high CLTV. They can acquire instead of building. It's healthy to have profit close to $0, if not slightly negative. If revenues fall or costs increase, they can make up for the difference by just firing people or cutting unprofitable projects.
Also when they're raising money, it makes absolutely no sense to be profitable. If they were profitable, why would they raise money? Just use the profits.
Profit is money you couldn’t figure out how to spend. During growth, you want positive operating margins with nominal profits. When the company/market matures, you want pure profits because shareholders like money. If you can find a way to invest those profits in new areas of growth, that’s better.
Everyone wants to treat OpenAI like a car wash business where they need to make a profit almost immediately. I don’t know why people can’t understand that the industry is in a rapid growth stage and investing the money is more important than making a profit now. The profits will come later.
The nearly $1T hand wave. Forgive me if I ask how. Might give it some credence if Anthropic and Google weren't pulling even with or surpassing them in various way or markets.
Whats worse is they mostly seem to have retail market name recognition which is arguably the hardest, or maybe the impossible market to make money from.
Whats worse is they mostly seem to have retail market name recognition which is arguably the hardest, or maybe the impossible market to make money from.
Apple is another one that focuses almost exclusively on retail and is also one of the most profitable in history.
Holy crap, is it the year 2000 again?
Profit is the money showing your business is sustainable. Ever since the ZIRP era US companies keep haemorrhaging money at a rate that is physically impossible to recoup.
If OpenAI plans to lose 100+ billion dollars per year for half a decade, what profits are you talking about to offset the losses?
> When the company/market matures, you want pure profits because shareholders like money.
Ah yes. Shareholders like money. And not, you know, basic accounting like "we need money to actually pay salaries, pay for equipment and offices etc. without perpetually relying on seeming endless investor money".
You don’t need profit to offset the losses.
You can simply reduce spending / expenses.
One does not “simply” reduce spending.
Why does stock price go up after mass layoffs?
Company would no longer function of course but why it would matters if the stock price is through the Moon?
Notice I said you should have nominal profits.
> Ah yes. Shareholders like money. And not, you know, basic accounting like "we need money to actually pay salaries, pay for equipment and offices etc. without perpetually relying on seeming endless investor money".
All of these are costs that reduce your profits.
A maximally profitable business fires all employees except shareholders, closes every office, stops all RnD, and leases IP or real estate to others on long-term deals that never need to be renegotiated.
Since everyone is trying to get compute from anywhere they can, including OpenAI going to Google, it's hard to tell what is used internally vs externally.
For example, it's entirely possible that Google's internal roadmap for Gemini sees it using $600b of compute through 2030 as well. In that case, OpenAI needs to match since compute is revenue.
So the same money spent by OpenAI and Google doesn't carry nearly the same amount of risk?
OpenAI doesn't?
I'll also add that Google is already a player in that space so more likely to easily sell it off.
Why are we saying that OpenAI and Anthropic can't do the same?
Openai can't claim either.
Uber was only on a path to monopoly in the US, not world wide. It’s lost to local competitors in most countries. And it can get disrupted by self driving cars soon.
OpenAI’s SOTA LLM training smells like a natural monopoly or duopoly to me. The cost to train the smartest models keep increasing. Most competitors will bow out as they do not have the revenue to keep competing. You can already see this with a few labs looking for a niche instead of competing head on with Anthropic and OpenAI.
Distilling might only be effective in the chat bot dominant era. We are about to move to an agents era.
Furthermore, I’m guessing distilling will get harder and harder. Claude Code leak shows some primitive anti distilling methods already. There’s research showing that models know when it’s being benchmarked. Who’s to say Anthropic and OpenAI aren’t able to detect when their models are being distilled?
Absolutely they will. And this is a huge problem for OAI - given Google is targeting vertical integration, they will acquire a cost-advantage. As long as the model performance is good enough, they will kick OAI and Anthropic out in the long-run.
The valuations of OAI and Anthropic are nonsense. A true valuation would incorporate failure risk, which is natural for startups/fast growing and money losing firms. Anyone who takes them serious is incredibly delusional.
It took them ~14 years to lose that $34 billion. Some projections suggest that OpenAI has lost a third of that in a single quarter. Even the most optimistic projections indicate that they're losing that much every 2-3 years. There's talk that they might lose ~$150B before profitability.
These are just numbers on a page to regular people, but $34 billion and $150 billion are very different numbers.
The problem for OpenAI is that the cost of getting them where they are now has been to high and competitors can now establish themselves for much less money.
The dame Uber that lost close to 30 billion dollars over 10 years to subsidize its price dumping?
No, no we are not treating OpenAI differently than Uber
I remain skeptical of Uber.
Sure, maybe OpenAI and Anthropic will make it work. It's not impossible. But it's far from guaranteed.
Uber generates about $1b in profit yearly now.
Maybe, if you take their word for it, and treat the models as capital assets rather than part of the COGS for the inference product. That's pretty far off from where Amazon was at.
Yes
>before making a profit.
No
the expectation is that they'll eventually make money. they can't raise forever. only startups are not profitable for a few years. but most companies that have existed for a long while have been profitable
and since they're expected to make a LOT of money, everyone wants a piece of that future pie, pushing up the valuation and amount raised to admittedly somewhat delusional levels like here
profit isn't a function of having a killer product, it's a function of having no competition
Industries always consolidate and winners emerge. SOTA LLMs look like a natural monopoly or duopoly to me because the cost to train the next model keeps going up such that it won't make sense for 20 competitors to compete at the very high end.
TSMC is a perfect example of this. Fab costs double every 4 years (Rock’s Law). It's almost impossible to compete against TSMC because no one has the customer base to generate enough revenue to build the next generation of fabs - except those who are propped up by governments such as Intel and Rapidus. Samsung is basically the SK government.
I don’t see how companies can catch OpenAI or Anthropic without the strong revenue growth.
I’ll be polite and call this statement ‘a very debatable’ one.
no, most industries just sell boring generic products, a few industries favor monopolists. Semiconductors are one of them but LLMs are also as far removed from that business as is physically possible.
TSMC makes the most complicated machines humans have ever built, a LLM requires a few dozen nerds, a power plant, a few thousand lines of python and chips. That's why if you're Elon Musk you could buy all of the above and train yourself an LLM in a month.
LLMs are comically simple pieces of software, they're just big. But anyone with a billion dollars can have one, they're all going to be commoditized and free in due time, like search. Copying a lithography machine is difficult, copying software is easy. that's why Google burrowed itself into email, and browsers, and your phone's OS. Problem for openai is they don't have any of that, there's already half a dozen companies that, for 99% of people, do what they do.
Only one company on Earth can make the UV lithography machines TSMC buys for their highest end fabs, and they're not selling to anyone else.
The PRC tried to brute force this supply chain backed by the full might of the Party's blank check, all red tape cut, literally the best possible duplication scenario, and they failed.
It's believable that Meta, ByteDance, etc. can catch up too. It is not certain that scaling will meaningfully increase performance indefinitely, and if it stops soon, they surely will. Furthermore, other market conditions (US political instability) can enable even more labs, like Mistral, to serve as compelling alternatives.
Uber, TSMC, etc. have strong moats in the form of physical goods and factories. LLMs have nothing even remotely comparable. The main moat is in knowledge, which is easy to transfer between labs. Do you think all the money that goes into training a model goes into the actual final training run? No, it is mostly experiments and failed ideas, which do not have to be repeated by future labs and offshoots.
It's certain that it won't. We've already hit diminishing returns.
In this case because it's not clear that anybody has actually figured out how to sell inference for more than it costs
Whether GPT-5 was profitable to run depends on which profit margin you’re talking about. If we subtract the cost of compute from revenue to calculate the gross margin (on an accounting basis),2 it seems to be about 30% — lower than the norm for software companies (where 60-80% is typical) but still higher than many industries.
(They go on to point out that there are other costs that might mean they didn't break even on other costs - although I suspect these costs should be partially amortized over the whole GPT 5.x series, not just 5.0)
https://epochai.substack.com/p/can-ai-companies-become-profi...
https://martinalderson.com/posts/are-openai-and-anthropic-re... (with math working backwards from GPU capacity)
"Most of what we're building out at this point is the inference [...] We're profitable on inference. If we didn't pay for training, we'd be a very profitable company"
https://simonwillison.net/2025/Aug/17/sam-altman/
"There’s a bright spot, however. OpenAI has gotten more efficient at serving paying users: Its compute margin—the revenue left after subtracting the cost of running AI models for those customers—was roughly 70% in October, an increase from about 52% at the end of last year and roughly 35% in January 2024."
https://archive.is/OqIny#selection-1279.0-1279.305 (Note this is after having to pay higher spot rates for compute because of higher than expected demand)
That is not, in fact, "well known", but based entirely on the announcements of the inference providers themselves who also get very cagey when asked to show their work and at least look like they're soliciting a constant firehose of investment money simply to keep the lights on. In particular there's a troubling tendency to call revenue "recurring" before it actually, you know, recurs.
I mean sure, it's self reported.
But the inference prices somewhere like Fireworks or TogetherAI charges is comparable to what Google/AWS/Azure charge for the same model an we know they aren't losing money - they have public accounts that show it, eg:
https://au.finance.yahoo.com/news/wall-street-resets-amazon-...
Fireworks’ gross margin—gross profit as a percentage of revenue—is roughly 50%, according to the same person
https://archive.is/Y26lA#selection-1249.65-1249.173
> In particular there's a troubling tendency to call revenue "recurring" before it actually, you know, recurs.
If someone has a subscription then yes that is pretty normal.
Not if you've substantively changed rate limits 3 times in the last 5 months while still counting those forecast revenues. In most industries that's called rug-pulling.
Profit is money you can't find a use for to grow your business, so you give some of it to the government in the form of tax.
Also there is a big difference between operational expenses and capital expenses like building data centers.
I think OpenAI is being very aggressive on the growth vs conservative financial management spectrum but just saying "only profit should matter" is just wrong.
It's what attracts capital investment, which businesses need
As did Amazon, Google, Meta etc etc.
Could be wrong though.
Even a simple shop isn't profitable for months if it needs to buy stock up front, and run some ads to let people know about it. The money for that comes from the shop owners as an investment.
This is the same thing but on a slightly bigger scale, over a longer time frame.
US tech companies just continue operating because "revenue and growth".
US tech companies are some of the most profitable business in history.
Google made over $130B profit last year, Meta 60B.
I'm old enough to have had exactly the same arguments (on Slashdot for Google, here for FB) for both before their IPOs.
It's a uninformed argument and people should know better.