As Sam Altman pushes for IPO, the wheels are coming off OpenAI
Google makes its own hardware; Anthropic offers a service people need; and OpenAI? Well, they bought a news show to share their story they want it reported.
As Sam Altman races toward an IPO for OpenAI, the company is juggling executive exits, scrapped products, lawsuits, odd M&A activity, and a growing sense that the “inevitable future” narrative is starting to wobble under its own weight.
As a product. OpenAI is trapped between a far cheaper Gemini offering from Google, with its rising popularity, and Anthropic’s Claude, which delivers results people are willing to pay for; it seems OpenAI is stuck. The company’s bet on Nvidia hardware and massive datacenter presence has trapped them in an insanely expensive model that cannot compete with Google, and its own failings have ensured it cannot compete with Anthropic.
As a company, OpenAI’s investors are also its suppliers. Microsoft and Nvidia cut them checks so they can keep buying services. Basically, OpenAI is a spending machine built by those companies, and profitable customers are an illusion. When the investment dries up, so does the company.
OpenAI is vulnerable, especially as it nears its potential IPO. As investors pour in billions of dollars, all eyes are on its balance sheet. CFO Sarah Friar has reportedly expressed concerns that the company isn’t ready to go public as soon as Altman desires. There’s never been more pressure to generate revenue.
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In the past, Altman hadn’t expressed much concern about when and how OpenAI would turn a profit; in 2024, reports suggested that the company didn’t expect to do so until 2029. At OpenAI’s annual Dev Day in October, Altman told reporters, “Obviously, someday we have to be very profitable, and we’re confident and patient that we will get there.” But he appeared defensive later that same month on a podcast appearance, when host Brad Gerstner told him, “The single biggest question I’ve heard all week, and hanging over the market, is ‘How can a company with $13 billion in revenue make $1.4 trillion in spend commitments?’ You’ve heard the criticism, Sam.” Altman interrupted to respond, “First of all, we’re doing well more revenue than that. Second of all, Brad, if you want to sell your shares, I’ll find you a buyer. I just… Enough.” And in December, Altman reportedly announced that the company was declaring a “code red” amid competition to ChatGPT.
OpenAI has made revenue promises that no one can believe. They’ve developed a service that is too expensive to be as mediocre as it is and last very long, unless they keep burning everyone else’s money. Certainly, the $122B round they just raised at a nearly $1T valuation will keep them running for a while longer, but at the pace they incinerate money, there doesn’t seem to be enough runway — which explains Altman’s push for an IPO. That, however, should be enough to keep people away from that IPO.
Google makes its own hardware; Anthropic offers a service people need; and OpenAI? Well, they bought a news show to share their story they want it reported. Signs are not good.