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Comment by yalogin | Hacker News Reader

I don’t know why anyone would want to invest in OpenAI on the open market. They are wildly over priced, very much in the red, don’t have the momentum at this time. Their pitch is “trust us even though we are losing money every quarter we are building the user moat”. That is not their strength at this point. Llms have shown they are $ hungry and only enterprises have a proper use case for them. As evident from anthropic, even the $20 per month is not enough to sustain the token usage as they put limits. So OpenAI is far away in that race and their enterprise adoption is just chat, which is barely useful. So not sure what their pitch or near term target should be. Oh don’t forget they are also pushing on hardware and robots which are also huge cash sinks

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Yes, most of their top talent has left, except for Jakub. The top researchers I know have no interest in the company.

Yeah, and Jakub didn't seem to have much background in AI research. I'm sure he's a great coder and did a PhD on fast algorithms but it's a different area to pushing forward AI really.

Open market investing in private markets is kind of a dumpster fire everywhere. The offering prices are way too high, the contorted investment vehicles can skim a lot of your investment, and the platforms may not even be able to get the shares you bought because the company exercises right of first refusal.

It’s mostly a FOMO play for people who think they need to have some exposure to these companies they see all over the news.

I generally think the frontier model labs are doomed as businesses. There's just no economic case for them, especially when a few months later open source models catch up.

Yup. It's not trivial now to setup a system where you can get a frontier model to help do the research, draft a spec, humans read and comment on the spec, and then you get an open model to do the grunt work.

If the spec is very detailed, you've solved most of the problems you might encounter with open models.

You can then get a frontier model to then do a review against the spec.

Doing this cuts down frontier usage by a lot, as all the real work is local, tool calls are instant . It just feels nicer.

I think this is why you're seeing frontier models like Claude suddenly ban people using opencode/pi etc with a subscription (API users still good).

> I don’t know why anyone would want to invest in OpenAI on the open market

I can only assume hype. That’s why Sam Altman has the job he has. You don’t see the CEO of Anthropic going on the Tonight Show. He’s there to bring OpenAI to the forefront of people’s minds, and uninformed investors will follow.

All catches up to you eventually though.

Hasn't seemed to catch up with Tesla, which is still highly valued despite making a pretty mediocre car compared to the competition. Even if one makes the argument that Tesla vehicles are of good quality, it's still a high valuation that seems to show no sign of dropping.

I they tread very carefully, I do think their free+ads strategy has a huge potential payoff.

How could this possibly work? Google is profitable because they can insert ~4 ads into a search query. An LLM query costs about 2 orders of magnitude more resources to run than a Google search, so.. I'm not seeing it unless OAI can figure out how to shoehorn 400 ads per prompt into the interface somehow.

Longer sessions. You also have more potential for brand advertising compared to Google Search (which is mostly conversion ads). That being said, it's risky and can ruin your product if done wrong, but I think there are ways to do it right.

But longer sessions means more queries, which means more costs, which makes the problem even worse, right?

Only if the margins are negative. Yes, the cost to serve is most likely higher than Google's SRP, but I think the ads can be even better targeted and potentially have a higher CPM than Goog's.

What I'm saying is that I believe their ARPU could be higher than Google's, while what I think you're saying is that their cost will also be higher. I agree with that, but where we differ is that I think that while the margin will be lower, there is still potential to make a ton of money there.

They have a dataset of your deepest thoughts and questions AND a way to ask you stuff. Its literally the most valuable dataset on the planet

Google now ads an LLM result to about half the search results. I think they've figured out how to do that without too many resources.

Google doesn't have to fight context windows. They can cache and store an AI response to a Google query without having to worry about much other than locale etc. You can't do that a dozen messages into an LLM conversation.

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