OpenAI has made a number of moves recently. OpenAI was founded in 2015 as a non-profit (hence the Open in OpenAI), by 2019 they created a capped profit for-profit, meaning that it could earn money but not unlimited money. This was to allow them to raise capital based on potential future business prospects. In 2024, in response to the huge buzz they had generated, they went full-on for-profit. Recently, OpenAI decided to backed off for profit and took OpenAI from being a for-profit back towards being a not-for-profit. The company is now structured as a Public Benefit Corporation (PBC). They are also engaged in acquisition activity, most notably, they purchased codeium.
Read the actions as symptoms. A company with strong non-profit orientation starts to make progress towards its goal. Maybe it makes some breakthroughs. It starts to attract capital, even big capital like Microsoft. It has huge capital, but low revenue. Its premise originally was based on OpenAI having an effective monopoly. Clearly that failed. But it still has huge ambition and lots of money. So it buys some revenue streams and strikes out for the next leap. That next leap is Artificial General Intelligence (AGI).
Sam Altman wrote a letter to share the news of his restructure with the industry. In this, he cited the extreme cost of the Artificial General Intelligence efforts, stating that it would cost trillions of dollars and had become “no longer a nonprofit-sized ambition”. This is both a warning and a gauge of the scale that large scale AI training costs. It clearly reflects his (Sam Altman’s) belief that the cost of blazing the AGI trail will be so high that it will both form the next layer of competitive advantage and also act as a strong barrier. That is not the action of a non-profit. Mr Altman also stated that he wanted to be sure “democratic AI wins over authoritarian AI.” This is a clear positioning against China and/or other totalitarian forces.
So putting it all together, OpenAI has realized that it is now in a large and likely expanding market. OpenAI has a lot of capital, but that will only last if they continue to act like a leader. It is likely to expand its buying of companies that are more specialized that have revenue streams, even if they are marginal, if those revenue streams come with a reliable user base. Meanwhile, they are likely to continue to chase the AGI future, likely trying to associate with Microsoft’s research as well as other large capitalization sources. They have an effective technology, a considerable ability assemble a portfolio of capabilities by buying, and enough mindshare to get more investment….BUT….
All economies have downturns. A war between India and Pakistan, a down turn in capital markets, almost anything really could cause OpenAI’s money supply to shrink quickly if they cannot start to create products that leverage their assets into something compelling. And right now, they don’t have that.
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