from Hacker News

OpenAI completes deal that values company at $157B

by gmaster1440 on 10/2/24, 5:04 PM with 424 comments

  • by gmaster1440 on 10/2/24, 5:05 PM

  • by paxys on 10/2/24, 9:19 PM

    $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't make the numbers make sense soon then I don't see things ending well for OpenAI.

    Another interesting part:

    > 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.

    Considering there are already lawsuits ongoing about their non-profit structure, that clause with that timeline seems a bit risky.

  • by cs702 on 10/2/24, 5:15 PM

    Given the high risk, investors likely want a shot of earning at least a 10x return. $157 billion x 10 = $1.57 trillion, greater than META's current market capitalization. Greater returns would require even more aggressive assumptions. For example, a 30x return would require OpenAI to become the world's most valuable company by a large margin.

    All I can say to the investors, with the best of hopes, is:

    Good luck! You'll need it!

  • by heyitsguay on 10/2/24, 5:42 PM

    If I were an investor, I'd be pretty concerned with such a high valuation after the o1 release. It's great, no question, but in my usage so far it's a modest step up from 4o, much smaller than the 3->4 jump. Real world exponential growth is exponential until it's logistic, and this sort of feels like entering that phase of the LLM paradigm.

    Talking to friends who are very successful, knowledgeable AI researchers in industry and academia, their big takeaway from o1 is that the scaling hypothesis appears to be nearing its end, and that this is probably the motivation for trading additional training-time compute for additional inference-time compute.

    So where does that leave an investor's calculus? Is there evidence OpenAI can pull another rabbit or two out of its hat and also translate that into a profitable business? Seems like a shaky bet right now.

  • by threwaway4392 on 10/2/24, 9:49 PM

    They haven't even started their own versions of AdWords.

    Google's money printing is based on people telling Google what they want in the search bar, and google placing ads about what they want right when they ask for it. Today people type what they want in the ChatGPT search bar.

  • by epolanski on 10/3/24, 1:14 AM

    There's no chance in the world they are worth even a tenth of it.

    Like literally some of their best talent tomorrow starts their own company and all they need is data center credits to catch up with open ai itself.

    What is the company's moat exactly? Being few months at best ahead of the curve (and only on specific benchmarks)?

  • by teqsun on 10/2/24, 5:46 PM

    After Theranos and WeWork, I'm always skeptical of any Pre-IPO "valuations".

  • by paxys on 10/2/24, 11:16 PM

    OpenAI raises $6.6B.

    Related: Microsoft and NVIDIA's revenues increase by a combined $6.6B.

  • by arjunaaqa on 10/3/24, 3:36 AM

    Seeing the discussions, I would point out that a startup needs stability in leadership to grow that fast.

    Look at Google, Meta, etc.

    They were super stable in leadership when they took off.

    Can’t say the same for OpenAI.

    Also, being an AI researcher, them converting to profit org after accepting donations in name of humanity and non-profit is honestly shameful and will not attract most talented researchers.

    Similar to what happened to Microsoft once they got labelled as “evil”.

  • by Someone1234 on 10/2/24, 5:45 PM

    I hope better competition appear before the enshittification begins.

    As far as I understand it they're actually underwater on their API and even $20/month pricing, so we'll either see prices aggressively increase and or additional revenue streams like ads or product placement in results.

    We've witnessed that every time a company's valuation is impossibly high: They do anything they can to improve outlook in an attempt to meet it. We're currently in the equivalent of Netflix's golden era where the service was great, and they could do no wrong.

    Personally I'll happily use it as long as I came, but I know it is a matter of "when" not "if" it all starts to go downhill.

  • by ddxv on 10/3/24, 1:05 AM

    I'm surprised there isn't more concern for OpenAI in that open source / open weight models are fast catching up to the plateau that OpenAI is at. Include edge AI models, ie tiny models that fit in apps/extensions etc and you have a LOT of nearly free competition coming for OpenAI.

  • by moomin on 10/3/24, 7:22 AM

    People need to stop looking at the implied valuation of the stock purchase and take into account the rest of the financial terms. If the tiny stock trade values it at 10 and the attached huge preferred debt at 1, I know which valuation to believe.

  • by janandonly on 10/2/24, 5:24 PM

    ChatGPT is valued $157BN?

    What discount rate do you use on a cash burning non-profit?

  • by CSMastermind on 10/2/24, 6:27 PM

    I wonder why Apple pulled out

  • by sub7 on 10/3/24, 3:13 AM

    Funny that they will call syntactically correct word vectors trained on reddit comments "AGI". There is no "self learning", just chaining outputs trained on different .txt instruction sets.

    There has never been a better time to have human intelligence and apply it to fields that are moving towards making critical decisions based on latent space probability maps.

    NLP and Human-Computer Interaction however are fields that have actually been revolutionized though this wave so I do expect at least much better voice interfaces/suggestion engines.

  • by alanlammiman on 10/2/24, 9:58 PM

    I wonder if these investors have a liquidation preference as they would in normal VC rounds. And if it's a 1x preference (as is normal) or if a higher multiple is built in.

  • by throwup238 on 10/2/24, 5:37 PM

    > The new fund-raising round, led by the investment firm Thrive Capital, values OpenAI at $157 billion, according to two people with knowledge of the deal. Microsoft, the chipmaker Nvidia, the tech conglomerate SoftBank, the United Arab Emirates investment firm MGX and others are also putting money into OpenAI.

    Yeah, that bodes well. Led by Jared Kushner's brother's VC firm with the UAE's sovereign wealth fund and Softbank following. If not for Microsoft and NVIDIA, this would be the ultimate dumb money round.

  • by Rebuff5007 on 10/2/24, 5:53 PM

    I for one can never get over the fact that Mira Murati was not laughed out of the room when she said -- with a straight face -- that GPT4 had high school level intelligence and the non-existent GPT5 will have PHD-level intelligence [1].

    IMO -- this is not a serious company with serious people building an important long-lived product. This is a group of snake oil salesmen that are in the middle of the greatest grift of their careers. That, and some AI researchers that are probably enjoying limitless gpus.

    [1] https://www.timesnownews.com/technology-science/next-gen-cha...

  • by paul7986 on 10/2/24, 10:54 PM

    In April they hyped up being able to talk to something like a H.E.R. Yet it seems all hype and not a reality. They say sign up and u might get access lol ... startup for speak give us ur money but we don't have the product we advertised/hyped up! Won't give them anymore of my money!

  • by jppope on 10/2/24, 10:41 PM

    Can't help but think about this scene from silicon valley: https://www.youtube.com/watch?v=BzAdXyPYKQo

    The "no revenue" scene... All OpenAI needs to do is start making some revenue to offset the costs!

  • by eichi on 10/3/24, 10:24 AM

    Really good financial engineering which had convinced the value. Cheers.

  • by lupire on 10/2/24, 5:11 PM

    Does OpenAI have a moat?

  • by K0IN on 10/3/24, 10:54 AM

    so they are now close to where every float in the original gpt3 model, is worth 1$.

  • by pcurve on 10/2/24, 5:52 PM

    I'm wondering... if the rapid development of openai will actually have deflationary effect on the economy.

  • by artninja1988 on 10/2/24, 5:29 PM

    I've been very disappointed in recent model releases, to be honest. It seems that o1 is their venture into reasoning, llms lack so much, but it's unclear if their approach does actually works towards robust reasoning. I do cheer for them and hope they can come up with something. Ai research is advancing too slowly!

  • by gsky on 10/2/24, 9:33 PM

    as a geniune user (not robot) i could not create an account with OpenAI even after solving their puzzles 100 times.

  • by deisteve on 10/2/24, 5:49 PM

    $157B marketcap means they need to 20x their current revenue of roughly 400 million dollars by next year...

    But the revenue has flatlined and you can't raise your existing users cost by 20x...

    It truly is a mystery as to how anybody throwing other peoples money hopes to get it back from OpenAI