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Exactly three years ago, OpenAI took off with the launch of ChatGPT. The industry-wide race that followed has seen AI companies’ valuations soar, billions of dollars invested in data center infrastructure — and a lot of skeptics, too.
For one, experts have pointed out that OpenAI’s business fundamentals are inherently different from those of its competitors like Google. These legacy businesses can use existing revenue sources to fund their major AI capital expenditures.
However, Sam Altman-led OpenAI has raised a record amount of cash and also pledged to spend more than 1 trillion dollars Before the end of the decade without the profit of an existing business that generates ongoing revenue. (of the company recent announcement That he’s filling out ads in ChatGPT is probably an attempt to change that reality.)
The gap between the AI industry’s promises of a human-scale AI-powered future and the reality, in other words, has never been as wide as the huge gap between AI company valuations and their lagging revenues.
For many viewers, that kind of arrogance could end in disaster. As former Fidelity manager George Noble, who spent decades in asset management, Notes in a long tweetThe company is already “disintegrating in real time.”
“I’ve watched companies go bust for decades,” he wrote. “This has all the warning signs.”
In addition to stalling customer growth, Noble reported that OpenAI was reportedly losing a whopping $12 billion per quarter, with “$15 million per day on (text-to-video generator app) Sora alone.” Noble also cast doubt on the AI industry’s promises to scale up operations to meet demand, an extremely expensive undertaking that will become even more expensive as AI models demand even more power.
Whether their utility will increase at the same rate remains a major point of controversy some warnings We may have reached a point of diminishing returns, in which each new iteration of the same AI model provides smaller and smaller benefits.
“There’s a big math problem here that no one wants to discuss,” Noble said. “It would take 5 times the energy and money to make these models 2 times better.”
“The low hanging fruit is gone,” he said. “Each incremental improvement now requires exponentially more compute, more data centers, more power.”
As a result, the former asset management boss predicted that “the AI hype cycle has peaked” and “diminishing returns are becoming impossible to hide” while “competitors are catching up.”
Noble advised investors to stay away from OpenAI, arguing that “I’m not touching OpenAI-adjacent plays at these valuations” because “the risk profile is astronomical.”
one in separate tweetNoble compared Altman, who lost his temper during a podcast appearance last year, to former Enron CEO Jeffrey Skilling, who called an analyst an “ass” when asked about the company’s eyebrow-raising financial situation. The now-infamous 2021 conference call Following inquiries regarding non-release of balance sheets. Skilling was at the center of the Enron scandal and was ultimately found guilty of conspiracy, insider trading and securities fraud after the company’s collapse.
Noble’s comments come a week after the prediction was made by Sebastian Mallaby, senior fellow at the nonpartisan think tank Council on Foreign Relations. essay for new York Times That OpenAI’s money could run out in “the next 18 months”.
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“The failure of OpenAI would not be an indictment of AI, it would merely be the end of its most publicity-driven creator,” he wrote.
Noble, on the other hand, has apparently taken a far more bearish stance, arguing that Altman’s “code red” announcement late last year was a warning sign of a tough road ahead. In form of wall street journal informed At the time, the CEO urged employees to focus on improving ChatGPT, even at the expense of delaying other projects, as Google continued to play the successful game of catch-up.
And Noble isn’t backing down.
“I can’t put it any clearer,” he said in a tweet. follow up. “Just say no to Altman cheating.”
“OpenAI is a cash incinerator,” he said. “The product is a losing proposition for investors.”
More on OpenAI: Financial expert says OpenAI is on the verge of running out of money
