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投資雜談
Big Techs Soaring Profits Have an Ugly Underside: OpenAIs Losses Whats only starting to become clear is that AI startups are also sinkholes for losses Investors take a lot of comfort from the solidity of Big Tech earnings as worries grow about artificial intelligence overinflating valuations. But those earnings have an ugly underbelly: ever-bigger losses at the generative AI startups that spend big on chips and data centers supplied by the profitable public companies.
Quarterly profits soared at Nvidia, Alphabet, Amazon and Microsoft as AI-related revenue poured in (Metas were wiped out by tax). Cash flows are mostly fine, albeit a lot is now going into building new data centers. Some of the money comes from actually selling AI services to businesses, particularly at Alphabet and Microsoft.But much of the AI-related profits come from being a supplier to, or investor in, the private companies building the large language models behind AI chatbotsand theyre losing money as fast as they can raise it, and plan to keep on doing so for years.
OpenAI and Anthropic are the two largest suppliers of generative AI with their chatbots ChatGPT and Claude, respectively, and founders Sam Altman and Dario Amodei have become tech celebrities.
Whats only starting to become clear is that the companies are also sinkholes for AI losses that are the flip side of chunks of the public-company profits.
Both, along with plenty of other startups, are raising big money and committing to future spending that will require them to raise a lot more. As they spend it on chips and renting cloud computing, sellers of chips and cloud services are the winners and are spending heavily to expand.For this to continue, two things have to happen. First, the AI developers need to come up with winning products to cover their massive research and computing costs. Second, investors need to stump up enough to finance the losseswhich OpenAI alone estimated at more than $150 billionuntil then.
It might all work out. The chatbots are near-magical experiences until they make a basic error like thinking 5.11 is bigger than 5.9, a problem even the latest versions still suffer from sometimes.Fix these, fix the gaping security holes and stop them hallucinating, or making up their own facts, and many more businesses and individuals will be willing to pay. New products based on the same underlying technology could become ubiquitous, and eventually transform society.
But even their creators expect to lose money for a long time. OpenAI hopes to turn profitable only in 2030, while Anthropic is targeting 2028.Meanwhile, the amounts of money being lost are extraordinary.
Microsofts share of OpenAIs loss in the three months to Sept. 30 implies the startup lost more than $12 billion in the quarter. We dont know for sure since it doesnt publish its financial statements, but there were no obvious one-off events that would have led to enormous noncash write-downs.
Among companies that have reported so far for the quarter, OpenAIs loss matches the worlds biggest, that of satellite communications company EchoStar, according to SP Global Market Intelligence data. But Echostars giant loss was due to a noncash charge of $16.5 billion to write off parts of its 5G cellphone network. OpenAIs was most likely real money.
Its impossible to quantify how much cash flowed from OpenAI to big tech companies. But OpenAIs loss in the quarter equates to 65% of the rise in underlying earningsbefore interest, tax, depreciation and amortizationof Microsoft, Nvidia, Alphabet, Amazon and Meta together. That ignores Anthropic, from which Amazon recorded a profit of $9.5 billion from its holding in the loss-making company in the quarter.
