By Brendan Ulmer
Ulmer Uncensored
AI tools are getting harder and harder to avoid. Someone you know, or you yourself, has probably had to delete all the emojis and em dashes from an email that ChatGPT wrote, to hide its origins.
According to a Reuters article from June, ChatGPT has more than one billion active monthly users. The popularity of the product is undeniable. So with the success of this service, how much money is OpenAI making off of it? Well, actually, not a dime.
In fact, in the first two fiscal quarters of this year, OpenAI, lost over $20 billion. Meanwhile, OpenAI’s CEO Sam Altman is currently seeking a $1.5 trillion valuation for the company, according to the New York Times.
So what gives? Why are these unprofitable giants of the AI market receiving billions dollar investments? Well, I’m not an economist, but I would say it’s because these companies are far better at generating hype than profit, and it very well might be leading us towards a recession.
OpenAI has been very intentional about generating hype. According to Yahoo Finance, last year the company spent $5.73 billion dollars on marketing, over $300 million more than companies like Coca-Cola. It’s not just these Silicon Valley marketing departments generating hype for these companies, it’s the news media as well. How many articles have you seen in the last two years where experts warn us that AI superintelligence is on track to take all of our jobs and then kill us?
While I am staunchly against AI killing everyone (I’m unwavering in my opposition to it, in fact) these articles make it seem like these developers are working on something robust, powerful and even inevitable. As it stands, ChatGPT isn’t even currently capable of running a timer, let alone a human death factory.
This is an issue I have felt like Chicken Little on for a while. Not to sound like a conspiracy theorist, but the more people freak out about an AI apocalypse, the less they are scrutinizing if they even make financial sense. In an interview I conducted earlier this year, data center developer Sergii Gerasymovych said that he was not at all concerned about the AI market and compared their plans to that of the ride share company Uber.
Just like OpenAI, Uber was unprofitable for years, but had investors lining up to throw money at it. Uber’s plan was to lean on this giant pile of investor cash to undercut its competitors until it was the only dog left at the bowl. After they got the monopoly they had been working towards, they jacked up their prices and became profitable. This was sold to me as one of the best-case scenarios for companies like Anthropic and OpenAI.
So I ask, is that what we want? One or two, or, God willing, three AI companies with monopolistic control over, not only the market, but the direction of AI itself? Around the same time that I interviewed Gerasymovych, I interviewed an economist named Dean Baker. Baker co-founded the Center for Economic Policy and Research, and is widely credited for having predicted the dot-com bubble in the 90s and the housing crash of 2008. Baker is now ringing alarm bells about the AI market. In my interview with him, he was primarily concerned with the structure of the tech market in general.
“Some of the big companies, they’re, in essence, lending money to their buyers to buy their products,” Baker said.
For example, NVIDIA, which manufactures the infrastructure used to train AI in data centers across the country, invested $30 billion into OpenAI in February of this year. OpenAI then goes ahead and buys computing power from the software company, Oracle. To finish our circle, Oracle then goes and buys chips from NVIDIA. Memes have been circulating depicting the AI infrastructure market as a power strip plugged into itself.
“In order for its stock price to make sense, you’d have to have NVIDIA have like one-third of all corporate profits 10 years down the road,” Baker said. “Only God knows what their corporate profits will actually be.”
Invest safely out there. May we all be able to retire at an appropriate time.
Brendan Ulmer is a local writer. He can be reached at btu2703@gmail.com or at (913) 787-4132.