[spwa4]

WOW. These figures put the OpenAI valuation in perspective.

OpenAI: $3.6B revenue - people paying $2.7B for personal subscription (growth rate of 285% per year) - rest is AI

This would mean the latest OpenAI valuation of $156B is a P/E of about 43. For a company growing 285% per year ... that actually doesn't sound horrible. In fact, that's pretty good.

[lrae]

P/E is based on the net income, and they aren't even profitable yet.

Also, isn't Microsoft getting paid back 75% of the profits first, up to their investment, so $13 billion and then 49% for another ~100 billion?

[TrainedMonkey]

> Also, isn't Microsoft getting paid back 75% of the profits first, up to their investment, so $13 billion and then 49% for another ~100 billion?

That is roughly true, but also only matters if Microsoft can influence OpenAI policy and chooses violence^1 (taking profit over investment in technology). Otherwise I would expect OpenAI to keep investing all of their income into more AI. Meanwhile OpenAI is hellbent on reaching effective AGI / pushing towards singularity, as long as they keep making progress and having cheap access to capital profitability is not required. So my personal conclusion is to invest in people selling AI shovels because the madness will continue.

Note 1: in my humble opinion Microsoft choosing violence is highly unlikely with Nadella in change.

[fizzbuzz-rs]

P/E is based on profit, aren't you conflating earnings and revenue? As their earnings are negative, so would be their P/E ratio.

[devjab]

It’s kind of hard to really calculate the P/E for OpenAI as there are more factors in it than usual. Companies like Microsoft and Nvidia likely don’t care too much about their returns considering huge parts of their investments go directly back into their own companies through sales. It’s fairly easy to invest 10B into a company which will then spend almost all of that money on your Azure services. Meanwhile giving your own co-pilot AI products able competition to avoid antitrust lawsuits.

[onlyrealcuzzo]

It's not hard to calculate P/E.

You divide the price by earnings.

OpenAI has negative earnings.

It doesn't have a P/E.

[devjab]

Fair enough. I should have worded myself better to get what I meant across, which I totally didn’t because you’re right. What I meant to say was that their current investors won’t care about the p/e.

[raincole]

> OpenAI has negative earnings.

And how do you know that?

[djbusby]

Article says:

> they are expected to lose about $5B this year on about $3.7B of revenue

[tempusalaria]

It’s more than $5bln. That’s their adjusted loss which excludes stock based comp. Real loss is probably 8-10

[mrtksn]

As others said, E is for Earnings but it's kind of understandable for it to be negative and use the Revenue metric as they are spending huge amount on R&D.

IMHO the bigger risk is the "AI" ending up not doing that much after all or their R&D not paying off(which is a risk, their SORA is nowhere to be found when Chinese AI companies are having its alternative in production. Maybe OpenAI isn't that far ahead and it's the language barrier that gives that impression? I don't know I don't speak Chinese but things are happening outside of the Anglosphere).

[m3kw9]

AI not doing much is a massive underdog, galaxy massive

[wokwokwok]

> "AI" ending up not doing that much after all or *their R&D not paying off*

Emphasis added.

You spend money on R&D.

The expectation: You make money.

The AI company reality: The value of your propitiatory models drops to LITERALLY ZERO after they are superseded by a new generation of models, or worse, open inference models.

The risk isn't that the models don't work.

The risk is that it increasingly appears that the 'moat' these companies have is only as good as the amount of money they continue to pour into it. and when the moat is gone, so is the company.

I can also run a business where I create a moat by pouring money into it (remember MoviePass?), eg. literally paying people to use your service; but usually you have to have some kind plan that does not involve magical fairies (eg. AGI) in at the very least your pitch deck, to convince people you have a plan which goes from scale -> mega profit.

[m3kw9]

I would use factory automation as the analogy, it’s actually a direct analogy

[tomp]

Yeah the latest Pika model is mindblowing. Out of this world (though surprisingly creepy ad!).

https://x.com/pika_labs/status/1841143349576941863

Where's Sora?

[fastfuture]

Yeah it looks like we will have to wait a long time before getting access to sora

[apsec112]

That's price to sales, not price to earnings. OpenAI's price to earnings, strictly speaking, is negative since it loses money. For comparison, Amazon's price to sales ratio is around 3.

[loufe]

How much of the "people willing to pay" market has already been exploited? I cannot see 285% growth continuing for more than a year or two more, at most, even with huge step-ups in quality.

[rib3ye]

When you pay for ChatGPT, you’re not just buying a model, you’re buying the UX wrapper around a series of models, and that wrapper has been improving at a very rapid clip making it more accessible to a wider audience.

Example: a week ago the natural conversation feature sucked. Now it doesn’t. That’s huge for creating a D0 positive engagement.

[HarHarVeryFunny]

The question is, how many people are willing to pay for it, when there are free alternatives available. There are only ~1M developers in the US, who are perhaps the main market, and developer market for AI is changing rapidly, with the current best solution being Cursor + Sonnet 3.5, or Cursor Pro where you don't even need to bring your own Sonnet API key.

As AI gets more tightly integrated into IDEs, and office suites, then stand-alone products like ChatGPT become less relevant, and the underlying provider more of a replaceable commodity. Would anyone really notice or care if Github CoPilot switched overnight to use a Microsoft/Anthropic/Meta model rather than an OpenAI one ?!

[HeatrayEnjoyer]

D0?

[raincole]

The "E" in P/E isn't revenue.

That being said, $3.6B is quite a lot of revenue, considering it's mostly from a $20/mo subscription model.

[flakeoil]

But a revenue of $3.6B is peanuts compared to a company valuation of $156B.

[s1artibartfast]

There must be some other big whales in that category. Hard to believe they have 150 million paid subscribers

[malthaus]

you can't argue the valuation like that

the only way the valuation is put "in perspective" is if you estimate that we gonna have a race of heavy investments now to get to a point where the models are "good enough" and you no longer need to invest in training new ones, at which point you switch from running a immensely unprofitable business to a immensely profitable one.

the issue is that nobody knows when that will be the case (if ever) and it currently looks like whoever player is best equipped with capital to fund that race will have a winner takes all future ahead so you just place all your chips and hope for the best

[mppm]

Your math is a bit off. As per the article, estimated earnings for 2024 are about -5 billion, so P/E should be around -30. This is actually fairly typical for hot startups like WeWork.

[elorant]

So 75% of the revenue is from subscriptions? Where are the enterprise users? Are they in Microsoft’s revenue through Azure?