<story><title>OpenAI completes deal that values company at $157B</title><url>https://www.nytimes.com/2024/10/02/technology/openai-valuation-150-billion.html</url></story><parent_chain><item><author>paxys</author><text>Google is a digital advertising company. OpenAI hasn&amp;#x27;t even entered the ads business. In the absolute best case they can take over a large chunk of Google&amp;#x27;s search market share, sure, but that still doesn&amp;#x27;t make it anything similar to Google in terms of finances. How do they start making the queries profitable? What do they do when their competitors (Claude, Gemini, Llama, Mistral, Grok and several others) undercut them on price?</text></item><item><author>tptacek</author><text>You don&amp;#x27;t need science fiction to find the bull case for OpenAI. You just have to think it stands to be the &amp;quot;next&amp;quot; Google, which feels increasingly plausible. Google&amp;#x27;s current market capitalization is in the trillions.</text></item><item><author>nwiswell</author><text>&amp;gt;  if they don&amp;#x27;t make the numbers make sense soon then I don&amp;#x27;t see things ending well for OpenAI.&lt;p&gt;This is pretty much obvious just from the valuations.&lt;p&gt;The wild bull case where they invent a revolutionary superintelligence would clearly value them in the trillions, so the fact that they&amp;#x27;re presently valued an order of magnitude less implies that it is viewed as an unlikely scenario (and reasonably so, in my opinion).</text></item><item><author>paxys</author><text>$6.6B raise. The company loses $5B per year. So all this money literally gives them just an extra ~year and change of runway. I know the AI hype is sky high at the moment (hence the crazy valuation), but if they don&amp;#x27;t make the numbers make sense soon then I don&amp;#x27;t see things ending well for OpenAI.&lt;p&gt;Another interesting part:&lt;p&gt;&amp;gt; Under the terms of the new investment round, OpenAI has two years to transform into a for-profit business or its funding will convert into debt, according to documents reviewed by The Times.&lt;p&gt;Considering there are already lawsuits ongoing about their non-profit structure, that clause with that timeline seems a bit risky.</text></item></parent_chain><comment><author>plaidfuji</author><text>Google didn’t start as an ads company. It started as a blank text box that gave you a bunch of good answers from the internet in a list of links.&lt;p&gt;Were there competitors that did the same thing? AltaVista? Yahoo? Did they undercut on cost? Google was free, I guess. But Google won because it maintained its quality, kept its interface clean and simple, and kept all the eyeballs as a result. Now Google is essentially the entry point to the internet, baked into every major browser except Edge.&lt;p&gt;Could ChatGPT become the “go-to” first stop on the internet? I think there’s a fair chance. The revenue will find its way to the eyeballs from there.</text></comment>
<story><title>OpenAI completes deal that values company at $157B</title><url>https://www.nytimes.com/2024/10/02/technology/openai-valuation-150-billion.html</url></story><parent_chain><item><author>paxys</author><text>Google is a digital advertising company. OpenAI hasn&amp;#x27;t even entered the ads business. In the absolute best case they can take over a large chunk of Google&amp;#x27;s search market share, sure, but that still doesn&amp;#x27;t make it anything similar to Google in terms of finances. How do they start making the queries profitable? What do they do when their competitors (Claude, Gemini, Llama, Mistral, Grok and several others) undercut them on price?</text></item><item><author>tptacek</author><text>You don&amp;#x27;t need science fiction to find the bull case for OpenAI. You just have to think it stands to be the &amp;quot;next&amp;quot; Google, which feels increasingly plausible. Google&amp;#x27;s current market capitalization is in the trillions.</text></item><item><author>nwiswell</author><text>&amp;gt;  if they don&amp;#x27;t make the numbers make sense soon then I don&amp;#x27;t see things ending well for OpenAI.&lt;p&gt;This is pretty much obvious just from the valuations.&lt;p&gt;The wild bull case where they invent a revolutionary superintelligence would clearly value them in the trillions, so the fact that they&amp;#x27;re presently valued an order of magnitude less implies that it is viewed as an unlikely scenario (and reasonably so, in my opinion).</text></item><item><author>paxys</author><text>$6.6B raise. The company loses $5B per year. So all this money literally gives them just an extra ~year and change of runway. I know the AI hype is sky high at the moment (hence the crazy valuation), but if they don&amp;#x27;t make the numbers make sense soon then I don&amp;#x27;t see things ending well for OpenAI.&lt;p&gt;Another interesting part:&lt;p&gt;&amp;gt; Under the terms of the new investment round, OpenAI has two years to transform into a for-profit business or its funding will convert into debt, according to documents reviewed by The Times.&lt;p&gt;Considering there are already lawsuits ongoing about their non-profit structure, that clause with that timeline seems a bit risky.</text></item></parent_chain><comment><author>fnordpiglet</author><text>Google also offered a free product. OpenAI isn’t offering a free product but a subscription product plus metered API product amongst other. Their economics are structurally better than googles assuming they can keep growing their captured market share. Their outrageous costs are also opportunities to optimize costs, including massive amounts of R&amp;amp;D, etc. They don’t need to be profitable now - in fact as bezos demonstrated with Amazon for many years, profit is an indication you’ve run out of uses for capital to grow.</text></comment>