By John Q. Hosedrinker 
Microsoft’s recent financial filings reveal that OpenAI incurred a significant net loss during the quarter ending September 30th. Based on Microsoft’s reported $3.1 billion loss from its OpenAI investment, calculated through equity accounting, it is estimated that OpenAI’s loss was around $11.5 billion, with potential for an even higher loss exceeding $12 billion. This calculation is derived from Microsoft’s 27% stake in OpenAI, though a previous 32.5% stake is also reported. While this loss is substantial, the article highlights the financial capacity of Big Tech, specifically Microsoft, to absorb such losses within the current AI landscape.
Read the original article here
Microsoft earnings suggest a staggering $11.5B+ OpenAI quarterly loss. If Microsoft, holding a 27% stake in OpenAI, reports losses of this magnitude, the total quarterly loss for OpenAI swells to an eye-watering $42.5 billion. It’s a colossal sum, and the immediate reaction is one of disbelief. One can’t help but wonder how such a massive financial hole is even possible, particularly for a technology still largely replacing human labor and not necessarily creating tangible value.
The scale of these losses is further amplified when considering the broader economic context. The world economy is estimated at $172 trillion. The need for AI and cloud companies to generate $4 trillion annually to reach the break-even point is another level of financial commitment.
The ongoing narrative surrounding AI often feels like a carefully constructed fantasy. It is difficult to reconcile the idea of AI replacing human jobs without considering the implications for making money and sustaining a livelihood. Moreover, there is a fundamental disconnect between the promise of AI and its current reality. The AI tools in use today appear to produce more work.
The relentless investment in AI feels like a bubble, and there’s a growing sentiment that this isn’t a sustainable model. Several people involved in the discussion are skeptical of the value AI currently offers, with many questioning the actual utility of current AI integrations. The current applications of AI, such as automating tasks, often create more work due to the need for human intervention to correct errors.
The potential ramifications of the AI bubble bursting are significant. While the collapse of this bubble might not trigger a financial crisis like the ones seen in the past, it could certainly cause harm to hedge funds and retirement accounts as the stocks take a dive. The companies that are investing in AI are profitable and making huge revenues, but that does not guarantee that they will continue to see the same return.
The focus on cutting costs and increasing investment in AI, with all the money moving in the circle, is a sign of desperation. The companies involved, the ones backing AI projects, are just giving each other money to increase their revenues. The core component, OpenAI, is not generating a profit.
The underlying concern seems to be the lack of a clear path to profitability for these AI ventures. This is a common theme that pervades the discussion. Despite the billions poured into these projects, the fundamental question of how AI will generate revenue remains unanswered. It brings to mind whether these are realistic numbers.
If, and when, the AI bubble bursts, the tech landscape could resemble a post-nuclear wasteland. The tech world may never be the same. The question of whether this is the biggest bubble ever remains unanswered.