For OpenAI, the more people use the product, the same you spend on compute unless they can supplement it with another ways of generating revenue.
I dont unfortunately think OpenAI will be able to hit sustained profitability (see Netflix for another example)
I'd say dropping the price of o3 by 80% due to "engineers optimizing inferencing" is a strong sign that they're doing exactly that.
This is marginally less true for embedding models and things you've fine-tuned, but only marginally.
Optimizing serving isn't unlikely: all of the big AI vendors keep finding new efficiencies, it's been an ongoing trend over the past two years.
They finally implemented DeepSeek open source methods for fast inference?
Netflix has been profitable for over a decade though? They reported $8.7 billion in profit in 2024.
The more inference customers OpenAI has, the easier it is for them to reach profitability.
Obviously, lots of nerds on HN have preferences for Gemini and Claude, and having used all three I completely get why that is. But we should remember we're not representative of the whole addressable market. There were probably nerds on like ancient dial-up bulletin boards explaining why Betamax was going to win, too.
Again: I don't know. I've got no predictions. I'm just saying that the logic where OpenAI is outcompeted on models themselves and thus automatically lose does not hold automatically.
Similarly, nearly all AI products but especially OpenAI are heavily _under_ monetized. OpenAI is an excellent personal shopper - the ad revenue that could be generated from that rivals Facebook or Google.
You could override its suggestions with paid ones, or nerf the bot's shopping abilities so it doesn't overshadow the sponsors, but that will destroy trust in the product in a very competitive industry.
You could put user-targeted ads on the site not necessarily related to the current query, like ads you would see on Facebook, but if the bot is really such a good personal shopper, people are literally at a ChatGPT prompt when they see the ads and will use it to comparison shop.
(with many potential variants)
With the race to get new models out the door, I doubt any of these companies have done much to optimize cost so far. Google is a partial exception – they began developing the TPU ten years ago and the rest of their infrastructure has been optimized over the years to serve computationally expensive products (search, gmail, youtube, etc.).
What? Netflix is incredibly profitable.
* We have people uploading tons of zero-effort slop pieces to all manner of online storefronts, and making people less likely to buy overall because they assume everything is AI now
* We have an uncomfortable community of, to be blunt, actual cultists emerging around ChatGPT, doing all kinds of shit from annoying their friends and family all the way up to divorcing their spouses
* Education is struggling in all kinds of ways due to students using (and abusing) the tech, with already strained administrations struggling to figure out how to navigate it
Like yeah if your only metric is OpenAI's particular line going up, it's looking alright. And much like Uber, it's success seems to be corrosive to the society in which it operates. Is this supposed to be good news?
A great communicator on the risks of AI being to heavily intergrated into society is Zak Stein. As someone who works in education, they are see first hand how people are becoming dependent on this stuff rather than any kind of self improvement. The people who are just handing over all their thinking to the machine. It is very bizarre and I am seeing it in my personal experience a lot more over the last few months.
Plus there is the thing that "thinking models" can't really solve complex tasks / aren't really as good as they are believed to be .
OpenAI is very good at this as well because of their brand name. For many people ChatGPT is all they know. That's the one that's in the news. That's the one everybody keeps talking about. They have many millions of paying users at this point.
This is a non trivial moat. If you can only be successful by not serving most of the market for cost reasons, then you can't be successful. It's how Google has been able to guard its search empire for a quarter century. It's easy to match what they do algorithmically. But then growing from a niche search engine that has maybe a few tens of thousands of users (e.g. Kagi) to Google scale serving essentially most of this planet (minus some fire walled countries like Russia and China), is a bit of a journey.
So Google rolling out search integration is a big deal. It means they are readying themselves for that scale and will have billions of users exposed to this soon.
> Their last funding round in March valued them at 300B. Despite losing 5B last year, they are growing really fast
Yes, they are valued based on world+dog needing agentic AIs and subscribing to the extent of tens or hundreds of dollars/month. It's going to outstrip revenue things like MS Office in its prime.
5B loss is peanuts compared to that. If they weren't burning that, their ambition level would be too low.
Uber now has a substantial portion of the month. They have about 3-4 billion revenue per month. A lot of cost obviously. But they managed 10B profit last year. And they are not done growing yet. They were overvalued at some point and then they crashed, but they are still there and it's a pretty healthy business at this point and that reflects in their stock price. It's basically valued higher now than at the time of the Softbank investment pre-IPO. Of course a lot of stuff needed to be sorted out for that to happen.
Just yesterday, they reported an annualized revenue run rate of 10B. Their last funding round in March valued them at 300B. Despite losing 5B last year, they are growing really fast - 30x revenue with over 500M active users.
It reminds me a lot of Uber in its earlier years—fast growth, heavy investment, but edging closer to profitability.