OpenAI's Rocky Road to Profitability

Welcome to the 24th edition of The Leading Edge!

It's been a while since we dived into the world of OpenAI, so let's kick things off there. But that's not all - we've got some juicy updates from Meta, and a wake-up call for Europe's tech scene.

Buckle up, folks.

The $5 Billion Question: OpenAI's Expensive Growing Pains

OpenAI. The golden child of AI. The face of Generative AI revolution.

Also, the company expected to lose $5 billion this year.

Ouch.

That's not just a hole in the pocket. It's a crater.

But here's the kicker: they're raising $6.5 billion at a proposed $150 billion valuation. Double their previous valuation of $86 billion. Talk about confidence.

Am I excited? Meh. Lukewarm at best - especially at tha valution.

To put that in persepctive, consider CVS Health. Their 2023 revenue was $357.9 Bn, and their EBITDA was $18.2 Bn. Guess their market cap? less than half at $ 77.2 Bn.

Sure, OpenAI is unique. They're still the poster child for Generative AI, with the lion's share of the market. But there are storm clouds on the horizon (more on that in a bit).

Now, let's talk numbers. OpenAI's Monthly Recurring Revenue (MRR) is now a cool $300 million. That's a 1700% increase from early 2023. They're projecting $3.7 billion in annual sales this year and a whopping $11.6 billion in 2025.

Mouthwatering? Absolutely.

Realistic? We'll see.

Is a $150 billion valuation reasonable for a company bleeding $5 billion a year? OpenAI's got two years to become profitable (accoridng to fundraising data).

And the clock's ticking.

Now, I've heard the grumblings. "OpenAI is now ClosedAI," they say. Come on, folks. Let's be real. Did you expect investors to keep pumping billions into a loss-making machine out of the goodness of their hearts?

For-profit isn't just a choice. It's survival. (And Altman keeping a cool 7% of the company, is just... well, Altrusim ??)

The Great OpenAI Exodus: When the Ship Starts Leaking...

Speaking of survival, OpenAI and CEO Sam Altman have bigger fish to fry. Their leadership team is pulling a vanishing act.

CTO Mira Murati said Sayonara last week .

Chief scientist and co-founder Ilya Sutskever said Adios in May .

Co-founder John Schulman? Jumped ship to rival Anthropic in August .

President and co-founder Greg Brockman is on "extended leave" . (We all know what that means in corporate speak.)

Plus, a slew of other senior leaders have hit the eject button.

Now, let me ask you this: Why would top-tier executives of the hottest unicorn on the planet just... leave?

Ideology? Maybe for one (or two). But let's be real. Most people, with billions on the table, would stick around in jobs they hate, with people they despise, doing work that bores them to tears.

And hence the term "Golden Handcuffs".

There's also another explanation that makes sense: They know something we don't.

Think about it.

There's no universe where this level of executive churn aligns with their pivot to "for profit" or their ambitious growth targets.

The harsh truth? OpenAI's untouchable moat is drying up. Competition's caught up. The days of lightning-fast GPT-4 releases are gone. The execution machine is sputtering.

OpenAI might still be in the race, but they're no longer lapping the field.

Zuck's New Look, New Toys, and Meta's AI Ambitions

Mark Zuckerberg's been busy. New haircut, new toys, and some bold claims.

Remember when Apple released Vision Pro? Zuck didn't mince words: "Quest is a better product. Period!"

Bold? Yes. Accurate? Well...

In terms of software capabilities, he's not wrong. I've been in Apple's stable for ages, but Vision Pro? I passed. Not just because of the eye-watering price tag (okay, who am i kidding. I'm a penny pincher, that was it ??) , but because once the novelty wears off, there's not much left to do.

Enter Meta Quest 3S. At $299, it's practically pocket change compared to Vision Pro. Plus, Meta's got some cool AR glasses in the pipeline with Onion and Ray-Ban.

But hardware's just half the story. Let's talk AI.

Meta AI now boasts 500 million users. You can chat with it across Messenger, Facebook, WhatsApp, and Instagram. And now? It's got celebrity voices. Want John Cena or Kristen Bell as your AI assistant? Done.

Then there's Llama 3.2. This isn't just another language model. It's multimodal, processing both text and images. It's Meta throwing down the gauntlet to OpenAI and Google.

I'm itching to take it for a spin. But alas, EU regulations mean we're left watching from the sidelines. No Llama 3.2 for us. ??

Speaking of which...

Europe's Trillion-Euro Problem: A Wake-Up Call

Europe, we need to talk.

Seriously.

Did you know? Not a single EU company worth over €100 Bn has been born in the last half-century.

Zero.

Zilch.

Nada.

Meanwhile, across the pond? Six American firms have breached the €1 Tn mark. All of them sprouts from the last 50 years.

Ouch.

Former ECB President Mario Draghi's latest report isn't just a wake-up call. It's a five-alarm fire drill.

The culprits?

A rogues' gallery of innovation killers:

1. Fragmentation

2. Over-regulation

3. Misguided rules

4. Penny-pinching on crucial investments

5. An allergy to risk

Europe's been playing it safe. Too safe.

At least France is stirring. Making moves. Shaking things up.

Allez les Bleus!

I wish the Bureaucrats that pass these arcane regulations and the Luddites who cheer them read this report and understand the consequences. Or at least FT's condesnced version of it here .

Until Next Week...

And there you have it, folks! Edition #24 in the books. We're still growing, and your feedback remains crucial. Hit reply and let me know what you think! Got a burning topic you want covered next week? Don't be shy, share your ideas!

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See you next week, on the Leading Edge of tech and innovation!

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