Pundit ClaimsAI claims by Gary Marcus and Ed Zitron, with the evidence

Ed Zitron Where's Your Ed At Published

OpenAI Is A Bad Business

We recorded 46 claims from this post. 19 were checked against evidence. 27 can’t be checked. 38 more are held. Read the post at its source.

Claims from this post (46)

In the order they appear in the post. Each quotation is the speaker’s words in this post. A label such as “Supported” or “Can’t be checked” is the claim’s current assessment; its page has the evidence and the reasons.

  1. Assessment: Can’t be checkedSaid

    “In any case, OpenAI will likely prevail and raise this round from a cadre of investors that will have to invest a minimum of $250 million to put money behind a company that has never turned a profit, that has no path to profitability, and has yet to create a truly meaningful product outside of Sam Altman's marketing expertise.”

    What we tested: OpenAI will likely succeed in raising its current funding round.

  2. Assessment: Can’t be checkedSaid

    “This round is a farce — a group delusion, one borne of one man's uncanny ability to convince clueless idiots that he has some unique insight”

    What we tested: OpenAI's funding round is a farce and a group delusion driven by Sam Altman's persuasiveness.

  3. Assessment: Can’t be checkedSaid

    “in simpler terms, that OpenAI will likely raise $6.5 billion in funding, and then have to do so again in short order, likely in perpetuity.”

    What we tested: OpenAI will likely raise $6.5 billion and then have to raise again soon, likely indefinitely.

  4. Assessment: Can’t be checkedSaid

    “yet the company says that it expects to make $11.6 billion in 2025 and $100 billion by 2029, a statement so egregious that I am surprised it's not some kind of financial crime to say it out loud.”

    What we tested: OpenAI's projections of $11.6B revenue in 2025 and $100B by 2029 are egregiously unrealistic.

  5. Assessment: SupportedSaid

    “To be abundantly clear, as it stands, OpenAI currently spends $2.35 to make $1.”

    What we tested: OpenAI currently spends $2.35 for every $1 of revenue.

    What happened: The reported estimates imply $8.7 billion of expenses on their loss basis and an expense-to-revenue ratio of 2.35135. This supports the arithmetic reading, not a claim about realized expenditure. (CNBC, )

  6. Assessment: Can’t be checkedSaid

    “As I've said before, I believe there's also a subprime AI crisis brewing because OpenAI's API services — which lets people integrate its various models into external products — is currently priced at a loss, and increasing prices will likely make this product unsustainable for many businesses currently relying on these discounted rates.”

    What we tested: OpenAI's API is priced at a loss, and raising prices will likely make it unsustainable for many dependent businesses, creating a subprime AI crisis.

  7. Assessment: UnresolvedSaid

    “As I've said before, OpenAI is unprofitable, unsustainable and untenable in its current form”

    What we tested: OpenAI in its current form is unprofitable, unsustainable and untenable.

  8. Assessment: UnresolvedSaid

    “At the current cost of revenue, it will cost OpenAI more than $27 billion to hit that revenue target.”

    What we tested: At the current cost of revenue, it will cost OpenAI more than $27 billion to reach $11.6 billion in revenue by the end of 2025.

  9. Assessment: Can’t be checkedSaid

    “However, OpenAI's costs are likely to increase, because (as the New York Times notes) if this company grows by 300%, it's very likely that the free user base of ChatGPT increases along with it, burdening the company with more costs.”

    What we tested: OpenAI's costs are likely to increase because, if the company grows by 300%, it is very likely that ChatGPT's free user base grows with it and adds costs.

  10. Assessment: UnresolvedSaid

    “Even a $2 price increase (the first expected price hike for ChatGPT Plus, as the company reportedly works towards charging $44 per month) and similar price hikes on the Teams and Enterprise plans won’t do much to stem the flow of red ink on its balance sheet.”

    What we tested: Even a $2 ChatGPT Plus price increase and similar hikes on the Teams and Enterprise plans won't do much to stem OpenAI's losses.

  11. Assessment: Can’t be checkedSaid

    “OpenAI has not had anything truly important since the launch of GPT-3.5, and its recent o-1 model has not been particularly impressive.”

    What we tested: OpenAI has not had anything truly important since the launch of GPT-3.5, and its o1 model has not been particularly impressive.

  12. Assessment: SupportedSaid

    “OpenAI's products are increasingly-commoditized, with Google, Meta, Amazon and even Microsoft building generative AI models to compete.”

    What we tested: OpenAI's products are increasingly commoditized as big tech firms build competing models.

    What happened: The retrospective comparison identifies capability convergence by Llama 3.1, released during the target quarter. It supports increasing model substitutability while also documenting historical lags behind closed models. (Epoch AI, )

  13. Assessment: Can’t be checkedSaid

    “OpenAI's cloud business — meaning other companies connecting their services to OpenAI's API — is remarkably small, to the point that it suggests there's weaknesses in the generative AI industry writ large.”

    What we tested: OpenAI's API business is remarkably small, suggesting weakness across the generative AI industry.

  14. Assessment: UnresolvedSaid

    “And, fundamentally, I can find no compelling evidence that suggests that OpenAI will be able to sustain this growth. In fact, I can find no historical comparison, and believe that OpenAI's growth is already stumbling.”

    What we tested: He can find no compelling evidence or historical comparison suggesting that OpenAI can sustain this growth, and he believes its growth is already stumbling.

  15. Assessment: UnresolvedSaid

    “Cutting prices, therefore, only serves to slash whatever meager margins exist on those customers, or to turn those potentially-profitable customers into a loss center.”

    What we tested: Bulk price cuts by OpenAI only shrink thin margins or turn customers into loss centers.

  16. Assessment: Can’t be checkedSaid

    “As a result of these numbers, I have major concerns about the viability of OpenAI's business, and the generative AI market at large.”

    What we tested: Because of these API revenue numbers, he has major concerns about the viability of OpenAI's business and of the generative AI market at large.

  17. Assessment: Can’t be checkedSaid

    “That is, to be frank, extremely bad. These are estimates, but even if they were doubled, these would not be particularly exciting numbers.”

    What we tested: The estimated roughly $300 million a year OpenAI makes from business users is extremely bad, and even doubled would not be particularly exciting.

  18. Assessment: Can’t be checkedSaid

    “While 10 million paying subscribers might seem like a lot, "ChatGPT" is effectively to generative AI what "Google" is to search. Ten million people paying for this is table stakes.”

    What we tested: Because ChatGPT is to generative AI what Google is to search, ten million paying subscribers is table stakes.

  19. Assessment: Can’t be checkedSaid

    “Paying for ChatGPT Plus doesn't dramatically change the product, nor does it offer a particularly-compelling new use case for anyone other than power users.”

    What we tested: Paying for ChatGPT Plus doesn't dramatically change the product, nor does it offer a particularly compelling new use case for anyone other than power users.

  20. Assessment: Can’t be checkedSaid

    “As a company, OpenAI is flat-out terrible at product.”

    What we tested: As a company, OpenAI is flat-out terrible at product.

  21. Assessment: ContradictedSaid

    “That product is extremely commoditized. The free version of ChatGPT is effectively identical to the free version of Anthropic's Claude, Meta's AI assistant, Microsoft's Copilot, and even Twitter's "Grok."”

    What we tested: Free ChatGPT is effectively identical to free Claude, Meta AI, Copilot and Grok; the product is extremely commoditized.

    What happened: The launch announcement places access in premium subscription tiers during the target quarter. The explicit premium-only history in e2 corroborates that this was not an ordinary free consumer offering. (xAI, )

  22. Assessment: Can’t be checkedSaid

    “I'd also argue that those willing to pay for a "Plus" subscription are more likely to use the platform way, way more than free users, which in turn may (as one Redditor hypothesized regarding Anthropic's "Claude Pro" subscription) lose it the revenue on said premium subscriber.”

    What we tested: Paying ChatGPT Plus users likely use the service far more than free users, which may make OpenAI lose money on them.

  23. Assessment: UnresolvedSaid

    “Unlike Facebook and Google, ChatGPT’s most frequent free users actually become less valuable over time, and become a burden on a system that already burns money.”

    What we tested: ChatGPT's heaviest free users become less valuable over time and a cost burden, unlike free users of Facebook or Google.

  24. Assessment: Can’t be checkedSaid

    “You see, ChatGPT Plus is not a great business.”

    What we tested: ChatGPT Plus is not a great business.

  25. Assessment: ContradictedSaid

    “To hit a revenue target of $11.6 billion in 2025, OpenAI would need to increase revenue from ChatGPT customers by 310%.”

    What we tested: OpenAI would need to grow ChatGPT revenue by 310% to reach $11.6B in 2025.

    What happened: The derived counterexample reaches the target with a 213.5% increase in the stipulated ChatGPT baseline, assuming the stated mix and a full year at the resulting rate. This is a calculation from reported premises, not a measured revenue outcome. (CNBC, )

  26. Assessment: UnresolvedSaid

    “OpenAI lives and dies on the revenue gained from ChatGPT, a product that hasn't meaningfully changed since it launched beyond adding new models that do, for most users, exactly the same thing.”

    What we tested: ChatGPT, OpenAI's key revenue source, has not meaningfully changed since launch for most users.

  27. Assessment: UnresolvedSaid

    “And the fact these "annualized" figures have changed so little since June means that growth has slowed, because otherwise said numbers would have increased (as "annualized" is based on projections).”

    What we tested: Growth in OpenAI's and Microsoft's model-access revenue has slowed since June 2024.

  28. Assessment: Can’t be checkedSaid

    “This heavily-suggests that generative AI, as a technology, doesn’t necessarily have a product-market fit.”

    What we tested: Generative AI may lack product-market fit.

  29. Assessment: Can’t be checkedSaid

    “If OpenAI — which dominates with, I’d wager, at least a 30% market share — is only making $1 billion a year from selling access to its models, and at this stage in the massively-inflated hype bubble, there may not even be $10 billion of annual revenue from companies integrating generative AI into their products.”

    What we tested: If OpenAI, which he wagers has at least a 30% market share, makes only $1 billion a year from model access, there may not even be $10 billion of annual revenue from companies integrating generative AI.

  30. Assessment: Can’t be checkedSaid

    “If that’s the case, then OpenAI has to raise prices. Also, Microsoft has to raise prices. And that will likely spook those who have gotten used to these subsidized prices — which I discussed in The Subprime AI Crisis a few weeks ago — and they’ll start to disentangle themselves from generative AI.”

    What we tested: If OpenAI is underpricing to scale, OpenAI and Microsoft will have to raise prices, which will likely drive customers away from generative AI.

  31. Assessment: UnresolvedSaid

    “effectively meaning that every dollar of revenue is immediately eaten by the costs of acquiring it.”

    What we tested: The Information's estimate of about $4 billion in 2024 server costs effectively means that every dollar of OpenAI's revenue is immediately eaten by the costs of earning it.

  32. Assessment: Can’t be checkedSaid

    “After all, Anthropic is facing exactly the same problem, and is on course to lose $2.7 billion in 2024 on $800 million in revenue, which makes me think the likelihood of this being a quick fix is extremely low.”

    What we tested: Because Anthropic faces the same problem and is on course to lose $2.7 billion in 2024 on $800 million in revenue, he thinks the likelihood of a quick fix for OpenAI's costs is extremely low.

  33. Assessment: UnresolvedSaid

    “Also, at some point, OpenAI will have to work out a way to go public, because otherwise there is absolutely no reason to invest in this company, unless you are doing so with the belief that you will be able to offload your shares in a future secondary sale.”

    What we tested: At some point OpenAI will have to work out a way to go public, because otherwise there is absolutely no reason to invest unless you expect to sell your shares in a future secondary sale.

  34. Assessment: UnresolvedSaid

    “And, after that, OpenAI will still need to raise more rounds of funding.”

    What we tested: After the steps he lists, including its next round and eventually going public, OpenAI will still need to raise more rounds of funding.

  35. Assessment: UnresolvedSaid

    “Because access to its APIs isn’t a particularly big business, OpenAI’s hopes of hitting its revenue goals is almost entirely contingent on ChatGPT Plus continuing to grow.”

    What we tested: OpenAI's revenue goals depend almost entirely on ChatGPT Plus growth because its API business is small.

  36. Assessment: MixedSaid

    “ChatGPT Plus has no real moat, little product differentiation (outside of its advanced voice mode, which Meta is already working on a competitor to), and increasing commoditization from other models, open source platforms, and even on-device models (like on Copilot+-powered PCs).”

    What we tested: ChatGPT Plus has no real moat, little product differentiation apart from advanced voice mode (which Meta is already working to match), and faces increasing commoditization from other models, open-source platforms and on-device models.

    What held: The voice section announces spoken conversations with Meta AI across its messaging products. This supports the existence of a voice competitor, without establishing equal quality. (Meta, )

    What did not: Reasoning-model access was already part of Plus before the post. Together with e4, this establishes a capability difference beyond the voice exception. (OpenAI, )

  37. Assessment: Can’t be checkedSaid

    “This suggests a fundamental weakness in the revenue model behind GPT, as well as a fundamental weakness in the generative artificial intelligence market writ large.”

    What we tested: OpenAI's thin API business indicates fundamental weakness in GPT's revenue model and the generative AI market.

  38. Assessment: Can’t be checkedSaid

    “OpenAI is trapped.”

    What we tested: OpenAI is trapped with no pricing room.

  39. Assessment: SupportedSaid

    “All of this is happening at a time when an astronomical amount of talent is leaving the company — the talent that OpenAI desperately needs to build products that people will actually pay for.”

    What we tested: OpenAI is losing a huge amount of the talent it needs to build products people will pay for.

    What happened: The simultaneous departure announcements cover the chief technology officer, chief research officer and a research vice president. Those roles support the ordinary reading of a substantial concentration of relevant leadership departures. (The Register, )

  40. Assessment: Can’t be checkedSaid

    “At this point, it’s hard to see how OpenAI survives.”

    What we tested: It is hard to see how OpenAI survives.

  41. Assessment: Can’t be checkedSaid

    “These aren’t the actions of a company that’s on the forefront of anything — they’re desperate moves made by desperate people burning the candle at both ends.”

    What we tested: OpenAI's rushing of products like o1 is not the action of a company at the forefront but desperate moves by desperate people burning the candle at both ends.

  42. Assessment: UnresolvedSaid

    “Yet, once you get past these problems, you run head-first into the largest one: that generative AI is deeply unprofitable to run.”

    What we tested: Generative AI is deeply unprofitable to run.

  43. Assessment: Can’t be checkedSaid

    “OpenAI is a disaster in the making, and behind it sits a potentially bigger, nastier disaster — a lack of any real strength in the generative AI market.”

    What we tested: OpenAI is a disaster in the making, and the generative AI market lacks real strength.

  44. Assessment: Can’t be checkedSaid

    “I believe the upcoming earnings from Microsoft and Google will further dampen excitement around generative AI, which in turn will reduce the likelihood that developers will integrate GPT further into their products, while also likely depressing market interest in ChatGPT writ large.”

    What we tested: He believes upcoming Microsoft and Google earnings will further dampen excitement about generative AI, reducing the likelihood that developers integrate GPT further and likely depressing market interest in ChatGPT.

  45. Assessment: Can’t be checkedSaid

    “This is a company lost, bleeding money with every interaction with the customer, flogging software that’s at best kind-of useful and at worst actively harmful.”

    What we tested: OpenAI is a company lost, bleeding money with every customer interaction and selling software that is at best kind of useful and at worst actively harmful.

  46. Assessment: Can’t be checkedSaid

    “If I’m right, we’re watching venture capitalists and companies like Microsoft burn tens of billions of dollars to power the next generation of products that nobody gives a shit about.”

    What we tested: If he is right, VCs and Microsoft are burning tens of billions on generative AI products nobody cares about.

Held from this post (38)

These records did not pass every check, so nothing about them is published. Held is not a finding.