Among other things, I warned that “although the underlying technology initially improved rapidly, leading to a lot of excitement, it may soon, perhaps this year or next, reach a plateau”, that “is still not clear that there will be enough adoption to justify the company’s stratospheric valuations”, “internal tensions are likely to remain”, and that “OpenAI lacks both profits and a moat”. (View Highlight)
Let’s start with profits. I have long suspected that OpenAI was losing money, and lots of it, but never seen an analysis, until this morning. The Information just dropped a (tentative) analysis, and it’s not pretty: (View Highlight)
That’s not great news for OpenAI, and you can see why they haven’t been, um, Open, about their financials (reporting only revenue but not costs and profits), if The Information is even close to right. (Ditto for Anthropic, which faces similar challenges). (View Highlight)
That’s profit. How about moat, Silicon Valley-ese for a way to hold off your competition? Facebook’s initial moat, for example, was its social network, which simply couldn’t be touched; they could afford to lose money for a long time at the beginning, because of that moat. (View Highlight)
OpenAI, as far as I can tell, doesn’t really have any moat whatsoever, beyond brand recognition. Customers can easily switch to other providers, almost anytime they want, and for month there had been more and more alternatives, including Anthropic and Google, at more and more attractive prices, forcing OpenAI itself to cut prices just a few days ago. But then was then. (View Highlight)
Yesterday was something even more dramatic: MetaAI all but pulled the rug out from OpenAI’s business, offering a viable competitor to GPT-4 (similar on many benchmarks) for free. (View Highlight)
LLMs have just became exactly the commodity I predicted they would become, at the lowest possible price. How can OpenAI survive in that context? (View Highlight)
(View Highlight)