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Part of the issue is the respective positioning:

- OpenAI wants to be the consumer version of AI, modeled after Google and Meta, with a mostly free universal service powered by ads and e-commerce. They haven't fully shown that model can work. The big problem is the lack of zero marginal costs as each new user requires GPU spend.

- Anthropic positions itself more as enterprise AI, modeled after Microsoft ironically enough, and charges big companies for services. The economics of coding agents work but GPUs get expensive fast and open models are getting good enough for most use cases.

So it's a race between ads and e-commerce offsetting AI spend and open source eating almost everyone's lunch.

Even open source models need hardware and energy to inference. Therefore, anyone offering a free ChatGPT competitor will be using the same unit economics.

My bet is that OpenAI will make free ChatGPT work through ads.

It's a very open question whether the economics for ads work though. Ads aren't just an infinite money pit you can just reach into, they have a price ceiling you have to stay under before they stop making sense for the advertiser. And if some of the rumours about OpenAI's ad CPMs are true, the inventory is going to be massively expensive.

It makes sense for it to be expensive, mind. The unit cost of serving an LLM response is so much higher than the unit cost of serving a bunch of Instagram posts, or traditional search results or whatever.

But price too highly, most advertisers won't be able to justify them. Why spend $60 for what you can buy from Meta for $6? It's a brave media buyer who runs with that as a long term strategy. But if you don't price highly, you're just offsetting some of the losses. The whole reason Google, Meta et all's ad networks exploded what because they cost less to get reach than traditional media did before, which opened them up to a bazillion small businesses who otherwise didn't have the capital to get off the ground through traditional media. ChatGPT's will cost more than what's available now. Massively more. There's not a lot of history of that working out!

They'll get some buyers for a little while, the $60 vs $6 equation balances out if the ads are 10x more effective, and companies will throw a bit of money into campaigns to get a feel for how well they perform.

(Google is in a different position, they make basically near infinite margin on other ad types and can lump budgets in together to get still-attractive blended CPMs. It's a hit, but it's worth taking to protect their wider network, just like they did for years when Youtube wasn't remotely profitable.)

The window has basically closed for them for the time being. The business math just isn’t there.

The best option at this point is kick the can down the road and hope market sentiment improves next year. Not much signal that it will, and quite a lot of signal the sentiment only declines, but pumping the brakes is the least worst option on the table.

> window has basically closed for them for the time being. The business math just isn’t there

Unless Anthropic also cancels its IPO, this probably isn't it.

The math doesn’t help Anthropic either but the market views these two companies very differently at the moment. Anthropic is seen as having momentum. Open AI is seen as having likely peaked. That makes a huge difference when pitching an IPO.
> The business math just isn’t there.

What do you mean? I promise I'm not being facetious or satirical. I'm just too simple and conservative of an investor to understand this comment. (for example: Is the price-to-earnings ratio too high? I probably wouldn't want to invest in the business.)

They are losing too much money. With open source options that are always close to frontier performance it will always be hard for them reduce training costs and charge premium rates.
I doubt that anyone at OpenAI would let their payday decrease. If anything, they got assurances that everyone would keep the bubble going until 2028 no matter what.
There may never be another window. They will run out of money especially if open models catch up.
They should have done it a year or two ago when the hype was strong.

Today everyone knows there's no agi coming up and it will be a very long time until they generate any profits, if ever.

AI exits in America probably have a political cliff approaching fast as populist backlash will hit them, or perhaps they see political winds favorable to regulatory capture in the future and are waiting for that?
Data centers are the next Dark Fiber from 2000. After VCs and private Equity fund them there will not be sufficient demand because AI will inevitably not entirely live up to all the hype. The fire sale will eventually begin. Then Google, M$, Apple and Amazon will buy them at a discount just like Google snatched up the dark fiber after 2000.
> AI exits in America probably have a political cliff approaching fast as populist backlash will hit them

The populist backlash is coming for datacenters. I'm unconvinced that's truly problematic to these companies given data travels close to the speed of light and plenty of countries have energy, data interconnects and governments unresponsive to locals' concerns.

With all the uncertainty about AI regulation, I don't think now is the time.

How do you even value a company when we don't even know if GPT-6 will be made available to the general public?

I’m not so sure the uncertainty around _regulation_ is the concern here.
OpenAI and Anthropic valuations are based on the premise that they may develop AGI in the near future. How do you value a company based on that premise? Throwing regulations into the mix doesn't make the problem much harder than it already is.
Maybe they want a Mythos level model first.
Good news: GPT-5.6 has been export restricted.
They realised their numbers are much worse than anthropics
You know anthropics numbers? They still haven’t filed either.
They said they’re profitable on operating profit.

Think it’s pretty safe to assume theirs are less of a dumpster fire

“A bird in the hand is worth two in the bush” as the saying goes.

Maybe they will show major Ad revenue and Codex sales and get a higher price next year but it’s a risk.

OpenAI is in deep trouble is what I am reading into this
I actually see this as an indicator that they still feel they can comfortably raise in the private market. If they tried to rush an IPO into an indifferent public market it would look worse, in my opinion. I'm not saying they're in great shape--they may be in terrible shape for all I know. But I think rushing the IPO would send a worse message than holding off.
Why?
> up from the company’s last private valuation of $730 million

typo

For now.. ;)
They just want to see Anthropic crash first and then be the last survivor.
If Anthropic tanks in the public markets, that will cause a revaluation of OpenAI in the private markets. If they delay IPO to try another private round, they also want to sign that round early.

Perhaps that's Anthropic's plan, is they believe OpenAI is weak. If the IPO is good they win. If it's bad OpenAI loses.

> They just want to see Anthropic crash first and then be the last survivor.

I don't think so. There's only two real options here:

1. There's no bubble to pop

2. There's a bubble to pop

In the first case, the first AI company to IPO gets a ton of money from the market who wants to get in on this, and the second to IPO finds that there's not enough capital left in the public markets and has to sell for less than they'd wanted to.

In the second case, the fir5st to IPO gets money from their shares, which drop in value (bubble popping), adn the second to IPO gets absolutely nothing (bubble popped).

In both cases, the first to IPO gets the rewards, the second gets either less or nothing.

> The A.I. company’s advisers are pushing its chief executive, Sam Altman, to move slowly after SpaceX’s stock has been volatile and as the start-up grapples with financial challenges.

Surely if your company isn't just blowing smoke then you have nothing to worry about. Or is this an admission that the insane valuation for these companies is currently just bullshit?

> if your company isn't just blowing smoke then you have nothing to worry about

Not really. Plenty of solid companies have to wring their hands around IPO timing based on market conditions. Sometimes, this is due to valuation multiples. Sometimes it's due to fads, e.g. investors preferring capital-structure efficiency versus low leverage.

It's over. Open models and chinese models will make fast progress and that nvidia+ms 128gb monster is what everyone will end up buying. sama can go back to running scams.
> The A.I. company’s advisers are pushing its chief executive, Sam Altman, to move slowly after SpaceX’s stock has been volatile and as the start-up grapples with financial challenges.

SpaceX's stock volatile? It's a shame nobody saw that coming.

Yes, it's actually the first volatile high-profile IPO so you can see why some people need to be reminded of the possibility.
Launched in the same way they launch Starship, full of ambition, promising a bit too much, but might explode at any moment. Either way it will be a spectacular show regardless of what happen.
It's actually remained about 14% or more above the IPO price which is roughly what you'd want but gone up and down a bit.

It's funny with stock prices - they all go up and down a bit in kind of random ways but people project all sorts of stories onto them that often don't relate much to reality.

> shame nobody saw that coming

Seeing something coming is very different from having it not only confirmed but also quantified.

Is it still being prematurely included in the major index funds?
I was really hoping that they Ipoed this year, so we can see their stock shoot up and down in flames, and we're really done with them and Sam Altman, once and for all.
After the IPO Altman will be even more insanely rich, and that time in a more liquid manner. I don’t think he will go away
While spcx has room to go up or down from where it is today, the reality is it that didn't drop like a rock on IPO day, so wall street bets vibes-based online "analysis" investing is only good for paper money.
Why would Sam go? He has the political power of this administration on his side. Far more than Elon, who is working hard to get it back through SpaceX military contracts. Anthropic has very little political sway, which is why they are in trouble now. OpenAI might wait to see if this government will destroy Anthropic’s chances in the USA. Then Sam could become the only player.
Bad idea, the AI hype train still has some gas, when it settles in that it's just another tool it's all going to fizzle out.
I can’t wait. It’s gonna be an absolute blast to watch.