The breaking news, in case you missed it:
And here is some analysis, reprinted by permission, from the well-known investor George Noble, a former Fidelity fund manager with a long, successful track record:
“These aren’t arms-length investments. They’re vendor financing dressed up as venture capital.” 65% of all venture capital in one round, to one company that has never made a profit (with no immediate hopes of doing so), and no clear technical advantage. What were they thinking?!
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One thing that Noble doesn’t mention is why OpenAI has struggled to make a profit; in my eyes, there are three reasons, that I have emphasized here before: the product is unreliable (placing an upper bound on how much many people be willing to pay), it is expensive to operate, and they have no technical moat, which has led to price wars.
The latter (lack of a technical moat) has also meant that competitors, from Google to Anthropic, have caught up, with some Chinese companies not far behind (and ahead on price).
It is important to remember that a couple years ago the conventional wisdom (which I long cast doubt on here) was that OpenAI was unassailable. Now, by their own lights, they are in a Code Red, with Google right on their heels.
That OpenAI’s’s valuation should more or less double in a year or so when they all but squandered their former lead appears, at least to me, to be insane. Since when does an employee get a 2x raise after a bad year?
Even with Nvidia and other propping them up, I hold onto my longstanding sense that there is a good chance that OpenAI will someday be seen as the WeWork of AI.
The finances just don’t make sense.
