The Exchanges

Q Um, and then we have no idea how was it ever finalized? What of the initial ten billion dollars was cloud compute?

A I don't know if it's ever been fully reported. I think it's, it's mo, it is the majority of it is my understanding. Um, it, whether that means it's seven or eight billion, or I think it's in that range. It's my understanding, but my colleagues, uh, uh, had a great story also earlier in the week, um, basically saying that Sarah Fryer, open AI CFO has told employees that look, we're going to spend some of the six, And a half billion dollars, um, you know, racing also to, to develop data centers with other, uh, potential, uh, uh, sort of companies. And essentially like they're in a race to kind of get compute and to get data center space. And Microsoft as one company isn't necessarily able to get a lock on all of it. So that relationship is, I wouldn't necessarily, it is slowly, they are, Very much joined at the hip, but both are trying to figure out how do we not become too dependent on each other.

AI assessment note: “it is the majority of it is my understanding... seven or eight billion”

Q million hosting, four hundred million sales and marketing, three hundred million. And you go from this very nice looking four billion in revenue after you add in all these costs to a five billion dollar loss. And that excludes stock based compensation, by the way, which is going to be another major cost. I mean, Corey, when you first came across this chart, what did you, what was your reaction?

A Uh, you know, at first a bit of confusion and, uh, mostly trying to understand, I mean, look, I think that this is like a new type of business, and so how they run their numbers, how they do their accounting, um, is, is going to be an interesting thing to watch, right? Like I remember I, I, like I interviewed some startup Uh, one time, like maybe four or five years ago about like why they hadn't hit their revenue projections or why their numbers were slightly off or whatever. And he was like, well, look, we're not running Alcoa here where, where, you know, some like giant, you know, old company where like, we know how the business runs. It's run the same way for a long time, blah, blah, blah. So I think just first, like understanding how open AI is sort of thinking about its business and where the costs are coming from. Um, That, you know, in itself is really interesting. It also is not surprising. I think like Sam Altman has said himself, like open AI is going to be one of the most capital intensive companies in history. Uh, I think he said the most capital intensive startup in history. So like, if we take them at his word, which as we know, maybe you shouldn't always do that. I do think in this case, like he's probably telling the truth. He is not, you know, uh, saying that, um, uh, you know, this company is not going to cost a ton of money to build. Um, and that is, you know…

AI assessment note: “at first a bit of confusion and, uh, mostly trying to understand”

Q dollars. Is there a limit to the way that this generative AI phenomenon can continue to grow if the leader, which is open AI, uh, ends up not really making a lot of money on the API. Like at some point it's like, why are you developing these foundational models? If it's, I guess maybe it's just to make the chat pop better. What do we think about this? Corey?

A Well, I think if you just think about it, if I, as a user of these products, as someone who is also trying to cover, you know, these companies that are growing quite big as a reporter, it's hard for me to keep up with sort of how each of these foundation model companies are, um, uh, actually moving ahead of, of each other in different aspects of how they actually can Can do math, do science, do, you know, sort of legal stuff. Like, like, it seems like between Mistral versus OpenAI versus Anthropic, like, you know, it, it's getting somewhat, these foundation models are, you know, in very tight competition with, with each other. And the value, uh, I think OpenAI is saying is in the consumer and enterprise brand, the, the, Not sort of what you're developing for other application developers, but a, they're kind of casting themselves, I think, as like an essential service that they can, um, you know, provide a lot of value to consumers on and can drive up subscription prices, and that's like an easier story to tell in a fundraising, so maybe that's why they're leaning into it and You know, no one's going to necessarily hold them to account to it if, if it turns out any differently. But yeah, uh, I, I, I think it's an acknowledgement that they think the API business is, is, is more of a commodity.

AI assessment note: “an acknowledgement that they think the API business is, is, is more of a commodity.”

Q revolutionize, I don't know, like, entire new products and entire new problems being solved for everyday people versus it can just write you some stuff or it'll help you with code from that only hit a certain segment or I, I'm trying to even picture what that product would be that every single person would be ready to pay 20 bucks a month or more. Yeah, Corey, is this feasible?

A Yeah, I think it's gonna have to be also just way deeper in the enterprise. I think like just having a consumer product is, you know, uh, it's gonna have to be, you know, pretty, pretty insane. It's gonna have to be very agentic, you know, where it's doing things for you to use their jargon. Um, but I think if it's able to revolutionize, like, you know, actual, uh, You know, there's money, there's, there's, there's a lot of money in the enterprise, I would say, like if they can actually like improve, uh, you know, sort of companies, efficiencies and bottom lines there. But like, look, I think right now the bear case is like a lot of this revenue is from early adopters who are, you know, sort of playing around with the stuff. Like that's how I would characterize my spending on On chat GBT. It's like, I haven't really figured, you know, like, yeah, I've listened to like plenty of people say like, oh, here's how you really get into it. Here's how you do it really well. And it just hasn't quite stuck. And, and I'm humble enough to, you know, maybe to say like, um, maybe I just don't get it. And like, maybe I just haven't integrated it into my practices very well. Um, but yeah, there's definitely like some early, um, adopter sort of effect going on that we'll need to expand beyond that.

AI assessment note: “I think like just having a consumer product is... gonna have to be very agentic”