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$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 y

$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

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qeternity 2y ago
I'm not justifying anything here but I think their revenues are expected to triple next year...now that doesn't mean they will of course. But why do you say they've flatlined?
NickNaraghi 2y ago
> But the revenue has flatlined and you can't raise your existing users cost by 20x... Why not? They’re already shopping a 2k/mo subscription option
- adastra22 2y ago
  Who would pay 2k/mo? For what? That’s someone’s rent.
  - tonyedgecombe 2y ago
    >Who would pay 2k/mo? Spammers.
ToValueFunfetti 2y ago
They made 300 million revenue last month, apparently up 17x from last year[1]. To get a P/E ratio of 20, assuming (falsely) that their spending holds constant, they'd need ~4x more revenue [1]https://www.nbcnews.com/business/business-news/openai-closes-funding-157-billion-valuation-microsoft-nvidia-softbank-rcna173693 https://www.nbcnews.com/business/business-news/openai-closes...
- KoolKat23 2y ago
  For a P/E ratio of 20 they'd need to generate earnings (not revenue) of $7.85 billion, earnings are revenue less all costs.
  - ToValueFunfetti 2y ago
    Right, so 300m $/mo. * 12 mo. * x - costs = 7.85b or $3.6b * x = 7.85b + costs I hold costs constant at $8B and get x = 4.4. $8B is probably a slight overestimate of current costs, I just took the losses from the article and discounted the last year's revenue to $3B. Users use inference which costs money so, in reality, costs will scale up with revenue, which is why I note this is a false assumption. But I also don't know how much of that went into training and whether they'll keep training at the current rate, so I can't get to a better guess.
    - thehappypm 2y ago
      They NEED to keep training forever. Otherwise free/cheap competitors catch up. Their only edge is being a half year ahead.
    - gizmo 2y ago
      If OpenAI starts making a lot of money on each subscription -- implied by your assumption that revenues will 4.4x while expenses stay constant -- the competition will aggressively undercut OpenAI in price. Everybody wants to take market share away from OpenAI, and that means OpenAI has to subsidize their users or sell at break even to prevent that from happening. Furthermore, training also gets exponentially more expensive as models keep growing and this R&D is not optional. It's absolutely necessary to keep current OpenAI subscribers happy. OpenAI will lose money, and lots of it, for years to come. They have no clear path to profitability. The money they just raised will last maybe 18 months, and then what? Are they going to raise another 20bn at a 500bn valuation in 2026? Is their strategy AGI or bust?
onlyrealcuzzo 2y ago
> The start-up expects about $3.7 billion in sales this year Where do you get $400M and flatline?
muzani 2y ago
"That meant OpenAI could provide a return for investors, but those profits were limited. OpenAI has also long been in talks to restructure itself as a for-profit company. But that is not expected to happen until sometime next year..." https://tvtropes.org/pmwiki/pmwiki.php/Main/IAmNotLeftHanded https://tvtropes.org/pmwiki/pmwiki.php/Main/IAmNotLeftHanded

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qeternity 2y ago

I'm not justifying anything here but I think their revenues are expected to triple next year...now that doesn't mean they will of course. But why do you say they've flatlined?

NickNaraghi 2y ago

> But the revenue has flatlined and you can't raise your existing users cost by 20x... Why not? They’re already shopping a 2k/mo subscription option

adastra22 2y ago
Who would pay 2k/mo? For what? That’s someone’s rent.
- tonyedgecombe 2y ago
  >Who would pay 2k/mo? Spammers.

ToValueFunfetti 2y ago

They made 300 million revenue last month, apparently up 17x from last year[1]. To get a P/E ratio of 20, assuming (falsely) that their spending holds constant, they'd need ~4x more revenue [1]https://www.nbcnews.com/business/business-news/openai-closes-funding-157-billion-valuation-microsoft-nvidia-softbank-rcna173693 https://www.nbcnews.com/business/business-news/openai-closes...

KoolKat23 2y ago
For a P/E ratio of 20 they'd need to generate earnings (not revenue) of $7.85 billion, earnings are revenue less all costs.
- ToValueFunfetti 2y ago
  Right, so 300m $/mo. * 12 mo. * x - costs = 7.85b or $3.6b * x = 7.85b + costs I hold costs constant at $8B and get x = 4.4. $8B is probably a slight overestimate of current costs, I just took the losses from the article and discounted the last year's revenue to $3B. Users use inference which costs money so, in reality, costs will scale up with revenue, which is why I note this is a false assumption. But I also don't know how much of that went into training and whether they'll keep training at the current rate, so I can't get to a better guess.
  - thehappypm 2y ago
    They NEED to keep training forever. Otherwise free/cheap competitors catch up. Their only edge is being a half year ahead.
  - gizmo 2y ago
    If OpenAI starts making a lot of money on each subscription -- implied by your assumption that revenues will 4.4x while expenses stay constant -- the competition will aggressively undercut OpenAI in price. Everybody wants to take market share away from OpenAI, and that means OpenAI has to subsidize their users or sell at break even to prevent that from happening. Furthermore, training also gets exponentially more expensive as models keep growing and this R&D is not optional. It's absolutely necessary to keep current OpenAI subscribers happy. OpenAI will lose money, and lots of it, for years to come. They have no clear path to profitability. The money they just raised will last maybe 18 months, and then what? Are they going to raise another 20bn at a 500bn valuation in 2026? Is their strategy AGI or bust?

onlyrealcuzzo 2y ago

> The start-up expects about $3.7 billion in sales this year Where do you get $400M and flatline?

muzani 2y ago

"That meant OpenAI could provide a return for investors, but those profits were limited. OpenAI has also long been in talks to restructure itself as a for-profit company. But that is not expected to happen until sometime next year..." https://tvtropes.org/pmwiki/pmwiki.php/Main/IAmNotLeftHanded https://tvtropes.org/pmwiki/pmwiki.php/Main/IAmNotLeftHanded