And Microsoft only paid $10B for that stake for the most recognizable name brand for AI around the world. They don't need to "hedge their bets" it's already a humongous win.
Why let Altman continue to call the shots and decrease Microsoft's ownership stake and ability to dictate how OpenAI helps Microsoft and not the other way around?
That's a flawed argument. Why wouldn't you want to hedge a risky bet, and one that's even quite highly correlated to Microsoft's own industry sector?
my impression is that many of these "investments" are structured IOUs for circular deals based on compute resources in exchange for LLM usage
Maybe that will be true someday. But, right now, they are burning billions of dollars every quarter. Their expenses far far outweigh their income and they are nowhere near profitability.
Hrm..
The point is that losing money isn't a sure sign that a business is doomed. Who knows where OpenAI will end up, but people still line up to invest. Those investors have billions reasons to be due diligent. Unlike what's claimed around here, most of investors aren't stupid. You yourself wouldn't be stupid either if money is at stake.
Genuine question because I feel like I’m maybe missing something!
The longer answer is; you never know whats coming next, bitcoin could have doubled the day after, and doubled the day after that, and so on, for weeks. And by selling half you've effectively sacrificed huge sums of money.
The truth is that by retaining half you have minimised potential losses and sacrificed potential gains, you've chosen a middle position which is more stable.
So, if bitcoin 1000 bitcoing which was word $5 one day, and $7 the next, but suddenly it hits $30. Well, we'd sell half.
If the day after it hit $60, then our 500 remaining bitcoins is worth the same as what we sold, so in theory all we lost was potential gains, we didn't lose any actual value.
Of course, we wouldn't sell we'd hold, and it would probably fall down to $15 or something instead.. then the cycle begins again..
Speculation based on selling at below cost.
> it’s not valued at trillions
Fair, it's only $852 billion. Nowhere near trillions.. you got me.
OpenAI's adjusted gross margin: 40% in 2024, 33% in 2025. Reason cited: inference costs quadrupled in one year.
Internal projections leaked to The Information: ~$14B loss on ~$13B revenue in 2026. Cumulative losses through 2028: ~$44B.
https://finance.yahoo.com/news/openais-own-forecast-predicts...
A business burning more than a dollar for every dollar of revenue is a lot of things. "Quite profitable" is not one of them.
If you're reaching for the SaaStr piece on API compute margins hitting ~70% by late 2025: yes, that exists, and it describes one tier. The volume is on the consumer side. The consumer side is the bit on fire. Pointing at the API margin and calling the whole business profitable is the financial equivalent of weighing yourself with one foot off the scale.
The original argument, in case it got lost: Microsoft holds (held) a 49% stake in a company projecting another $44B of cumulative losses through 2028, against unit economics that depend on competitors not catching up. That's textbook hedge-the-bet territory. "They have paying customers" doesn't refute that, MoviePass had paying customers too.
I didn’t call the business profitable, I said that inference is profitable. I was responding to your assertion that they’re speculating by selling below cost. Which isn’t true; they’re selling inference, profitably. They’re losing money because they’re investing in the next model. The company isn’t profitable, it might never be profitable, but the product they’re selling is profitable. So calling it speculation based on selling something below cost is just factually incorrect.
It isn't. Frontier model training is the cost of having a product to sell inference on next year. Stop training and the inference margin decays on the timescale of the next competitor release, which in 2026 is measured in weeks. So "the product is profitable, the company is just investing" describes a business where the investment is structurally non-optional and structurally larger than the product margin. That's the definition of selling below cost at the level that matters, which is the level you're hedging at when you hold 49%.
McDonald's is profitable because a Big Mac in 2027 costs roughly what a Big Mac in 2026 cost to make. OpenAI's product depreciates to zero on a 12-month cycle unless they spend ~$40B keeping it ahead. That's the disagreement, and "but inference itself has positive margin" doesn't resolve it, it just relocates it.