Comment by dijit | Hacker News Reader

Comment by dijit | Hacker News Reader

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Everything is personal preference, and perhaps I am more fiscally conservative because I grew up in poverty.

But if I own 49% of a company and that company has more hype than product, hasn't found its market yet but is valued at trillions?

I'm going to sell percentages of that to build my war chest for things that actually hit my bottom line.

The "moonshot" has for all intents and purposes been achieved based on the valuation, and at that valuation: OpenAI has to completely crush all competition... basically just to meet its current valuations.

It would be a really fiscally irresponsible move not to hedge your bets.

Not that it matters but we did something similar with the donated bitcoin on my project. When bitcoin hit a "new record high" we sold half. Then held the remainder until it hit a "new record high" again.

Sure, we could have 'maxxed profit!'; but ultimately it did its job, it was an effective donation/investment that had reasonably maximal returns.

(that said, I do not believe in crypto as an investment opportunity, it's merely the hand I was dealt by it being donated).

Microsoft didn't sell anything. OpenAI created more shares and sold those to investors, so Microsoft's stake is getting diluted.

And Microsoft only paid $10B for that stake for the most recognizable name brand for AI around the world. They don't need to "hedge their bets" it's already a humongous win.

Why let Altman continue to call the shots and decrease Microsoft's ownership stake and ability to dictate how OpenAI helps Microsoft and not the other way around?

> They don't need to "hedge their bets" it's already a humongous win.

That's a flawed argument. Why wouldn't you want to hedge a risky bet, and one that's even quite highly correlated to Microsoft's own industry sector?

I think people are looking for excuses to declare OpenAI and Anthropic teetering on the brink of failure when the actual reality is… they are wildly successful by absolutely any measure. This deal is proof. If Microsoft didn’t believe in OpenAI they wouldn’t have restructured it this way. They’d have tightened their reins and brought in “adult supervision”

> I think people are looking for excuses to declare OpenAI and Anthropic teetering on the brink of failure when the actual reality is… they are wildly successful by absolutely any measure.

Maybe that will be true someday. But, right now, they are burning billions of dollars every quarter. Their expenses far far outweigh their income and they are nowhere near profitability.

silly valley stopped letting the subtraction of two numbers dictate their reality since the start-up era. while the money and vcs stopped trying to finding the next uber and went all in on llms, they didn't get wiser in how they gauge if something is worth investing in

> they are wildly successful by absolutely any measure

Except revenue. Not one company is in the black. That’s a pretty important measure you’re ignoring.

do we know whether Microsoft could have been selling secondary shares as part of various funding rounds?

my impression is that many of these "investments" are structured IOUs for circular deals based on compute resources in exchange for LLM usage

About the same as they wasted on Nokia.

It's not hype, the demand for inference has grown more this year than expected.

If I buy oranges for $1 and sell them for $0.50 and I sell a lot of oranges, can I reasonably say that I've found a market?

Hrm..

Were you around here ten years ago when that exact argument was regularly regurgitated about Uber? Notice that argument is no longer popular?

The point is that losing money isn't a sure sign that a business is doomed. Who knows where OpenAI will end up, but people still line up to invest. Those investors have billions reasons to be due diligent. Unlike what's claimed around here, most of investors aren't stupid. You yourself wouldn't be stupid either if money is at stake.

Not saying you are wrong, but let's not forget the famous crashes of 1929, .com, and 2008 bubbles.

I don’t understand the “record high” point. How did you decide when a “record high” had been reached in a volatile market? Because at $1 the record high might be $2 until it reaches $3 a week or month later. How did you determine where to slice on “record highs”?

Genuine question because I feel like I’m maybe missing something!

The short answer is: it's the secretary problem.

The longer answer is; you never know whats coming next, bitcoin could have doubled the day after, and doubled the day after that, and so on, for weeks. And by selling half you've effectively sacrificed huge sums of money.

The truth is that by retaining half you have minimised potential losses and sacrificed potential gains, you've chosen a middle position which is more stable.

So, if bitcoin 1000 bitcoing which was word $5 one day, and $7 the next, but suddenly it hits $30. Well, we'd sell half.

If the day after it hit $60, then our 500 remaining bitcoins is worth the same as what we sold, so in theory all we lost was potential gains, we didn't lose any actual value.

Of course, we wouldn't sell we'd hold, and it would probably fall down to $15 or something instead.. then the cycle begins again..

They haven’t sold anything they’ve been diluted.

A company can dilute just like that?

Of course. Public companies do this too. Where do you think the stocks awards that they give to employees come from?

They come from just printing more shares every quarter, diluting every shareholder.

I was told stock to employees are left aside shares, or they sell the stock the company owns if they already went public.

I'm not convinced what you believe is true. Dilution is possible undoubtedly, but perhaps if majority shareholders approve it. And even then, likely regulated by a suite or other constraints.

Yep every quarter the Board has to approve it. Check the financial statement of AMZN for example.

It’s not more hype than product, it has found a market (making many billions in revenue), and it’s not valued at trillions. So wrong on all counts.

> It’s not more hype than product, it has found a market (making many billions in revenue)

Speculation based on selling at below cost.

> it’s not valued at trillions

Fair, it's only $852 billion. Nowhere near trillions.. you got me.

Inference is quite profitable, so wrong again.

Right. Going to take "inference is quite profitable" apart, because there's nothing else in your reply.

OpenAI's adjusted gross margin: 40% in 2024, 33% in 2025. Reason cited: inference costs quadrupled in one year.

https://sacra.com/c/openai/

Internal projections leaked to The Information: ~$14B loss on ~$13B revenue in 2026. Cumulative losses through 2028: ~$44B.

https://finance.yahoo.com/news/openais-own-forecast-predicts...

A business burning more than a dollar for every dollar of revenue is a lot of things. "Quite profitable" is not one of them.

If you're reaching for the SaaStr piece on API compute margins hitting ~70% by late 2025: yes, that exists, and it describes one tier. The volume is on the consumer side. The consumer side is the bit on fire. Pointing at the API margin and calling the whole business profitable is the financial equivalent of weighing yourself with one foot off the scale.

The original argument, in case it got lost: Microsoft holds (held) a 49% stake in a company projecting another $44B of cumulative losses through 2028, against unit economics that depend on competitors not catching up. That's textbook hedge-the-bet territory. "They have paying customers" doesn't refute that, MoviePass had paying customers too.

Pointing at the API margin and calling the whole business profitable is the financial equivalent of weighing yourself with one foot off the scale.

I didn’t call the business profitable, I said that inference is profitable. I was responding to your assertion that they’re speculating by selling below cost. Which isn’t true; they’re selling inference, profitably. They’re losing money because they’re investing in the next model. The company isn’t profitable, it might never be profitable, but the product they’re selling is profitable. So calling it speculation based on selling something below cost is just factually incorrect.

Granted on the narrow point: inference itself runs at a positive margin. Where it falls apart is the implicit claim that the training spend is separable.

It isn't. Frontier model training is the cost of having a product to sell inference on next year. Stop training and the inference margin decays on the timescale of the next competitor release, which in 2026 is measured in weeks. So "the product is profitable, the company is just investing" describes a business where the investment is structurally non-optional and structurally larger than the product margin. That's the definition of selling below cost at the level that matters, which is the level you're hedging at when you hold 49%.

McDonald's is profitable because a Big Mac in 2027 costs roughly what a Big Mac in 2026 cost to make. OpenAI's product depreciates to zero on a 12-month cycle unless they spend ~$40B keeping it ahead. That's the disagreement, and "but inference itself has positive margin" doesn't resolve it, it just relocates it.

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