Breaking: OpenAI is probably toast

Will OpenAI someday be seen as the WeWork of AI, as I have suggested several times, as far as back as late 2023? I still think so, and I think that moment is drawing close. They have, by any reasonable standard, seen rough times of late. Google and Anthropic have each largely caught up; various Chinese companies are closing in. More and more questions are being raised about their financing. (And more and more people are agreeing that AGI won’t arrive this decade).

More than that, last week Nvidia pulled back on a pledge of $100 billion, a terrible signal to other potential investors.

But you already knew all that. Here’s the kicker. Up until now, one of the biggest investors in OpenAI has been Masayoshi (Masa) Son — who was also the biggest investor in WeWork just before it fell – and this just dropped.

My jaw dropped when I read that. Ouch. “Nothing has been decided” is hardly a vote of confidence. Especially coupled with the Nvidia walkback of a week earlier. (Though in fairness, the CFO is not Masa Son himself).

OpenAI is losing money every quarter; even by their own (optimistic) calculations, they won’t make a profit for years. I doubt their runway would last much more than a year. If the venture capital dries up, they are toast. Talent will make a beeline for competitors. And with Nvidia dropping back and SoftBank potentially following suit, other investors (especially those without skin already in the game) will be skittish, too. They will rightly ask, what do Nvidia and SoftBank know that led them to these choices? As a friend of a friend put it, a lot of additional funding for OpenAI “is written on wet paper” that might easily be torn.

Small wonder OpenAI started probing about bailouts last fall; it’s looking more and more like they will need one. Hopefully the US government will have the good sense not to bite; Google and Anthropic are doing just fine, without government handouts.

OpenAI’s lead is slipping, and now it looks their financing is, too.