Enterprise Weekly #537: OpenAI’s Revenue Reality Check, AI Cloud Potential, and More
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Happy Friday.
Much of the buzz last week was around OpenAI and their perceived request for a government backstop, given the amount of cash needed for their infrastructure investments. Here’s what OpenAI CFO Sarah Friar said at a WSJ event:
“The backstop, the guarantee, that allows the financing to happen, that can really drop the cost of the financing but also increase the loan-to-value, so the amount of debt that you can take on top of an equity portion.”
This stirred up quite a bit of controversy, so much so that OpenAI CEO Sam Altman had to post a long message on X that clarified the company’s position. While the acknowledgement that they don’t have government guarantees for OpenAI data centers (and don’t expect the government to pick favorites) was the primary message conveyed, there were a number of other interesting bits that shine light on this unique point in time in the AI market.
“We expect to end this year above $20 billion in annualized revenue run rate and grow to hundreds of billion by 2030. We are looking at commitments of about $1.4 trillion over the next 8 years. Obviously this requires continued revenue growth, and each doubling is a lot of work!”
“We are also looking at ways to more directly sell compute capacity to other companies (and people); we are pretty sure the world is going to need a lot of “AI cloud”, and we are excited to offer this.”
“Based on the trends we are seeing of how people are using AI and how much of it they would like to use, we believe the risk to OpenAI of not having enough computing power is more significant and more likely than the risk of having too much. Even today, we and others have to rate limit our products and not offer new features and models because we face such a severe compute constraint.”
There are a number of interesting parts here. Given the capex commitments of $1.4T over the next 8 years, revenue for OpenAI isn’t just a nice-to-have anymore….it’s a necessary condition for business survival. It will be interesting to see the creative evolutions this binding constraint forces, in terms of the various other business models OpenAI tries en route to meeting that $100B revenue mark. An AI cloud could be one of them, which will bring into play interesting competitive dynamics with the other hyperscalers (including Microsoft).
What is for certain, though, is that the intense demand they’re seeing is reflective of the broader “pull” for AI, with the magical nature of these products forcing a flavor of adoption unprecedented in technology history. OpenAI’s stance is of the mindset that in a time of rapid change, the biggest risk is taking no risk and standing still. It will be fascinating to see how it plays out and how competition at the model layer shakes up, especially in a time where Anthropic forecasts being cash-flow positive by 2027.
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📚 Read more news:
WSJ: Microsoft Lays Out Ambitious AI Vision, Free From OpenAI
TechCrunch: Anthropic projects $70B in revenue by 2028: Report
CNBC: Google’s decade-long bet on custom chips is turning into company’s secret weapon in AI race
Reuters: AI startup Anthropic expands in Europe with offices in Paris, Munich
🧵 Read more threads:
Jon Lehr: Lessons from Selling to Wall Street
Proby Shandilya: Probservations S1E9 - Evals
Raymond Lau: Leapfin + Airwallex Partnership
Aakash Gupta: Energy as the Biggest Constraint
Gerrit De Vynck: Sarah Friar’s Vision for OpenAI’s Financial Path
Company: DevArmor
Role: Founding AI Engineer
Technology: Automated Threat Modeling & Security Design Review
Funding: $2.7M from Work-Bench
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Arctic Wolf acquires UpSight Security for an Undisclosed Amount
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