- Revenue sharing from drug discovery (called out by OpenAI CFO): Why would a pharma company give away the upside to a commoditized intelligence layer? Why would OpenAI have a more compelling story than Google Deep Mind, which has serious accolades in this space?

- Media generation for ads and other content: For ads, OpenAI is facing off against Google, Meta and Amazon, all of which have existing relationships with advertisers. For the foreseeable future, AI content will be a major discount product compared to humans. OpenAI will not get to charge $1M for an ad like a production company does. So the TAM of ad production (~$50B) shrinks below $1B because AI deflates prices so much.

- Other agent use cases: OpenAI doesnt have a surface to build these on. Google has chrome, Microsoft has office, Apple has OS's. The other use cases like coding will be a low-margin competition between model providers until some of them throw in the towel. The players with the best cash position win - and thats not OAI.

I think the place that they could win is retail (also called out by OAI CFO). They made deals with Etsy and other small retailers. I was fixing my guitar the other day and would have instantly bought the tools it had suggested that I would need. The problem is that they have to win against Amazon here, and there is zero chance of a partnership for obvious reasons.

The article mostly focuses on ChatGPT uses, but hard to say if ChatGPT is going to be the main revenue driver. It could be! Also unclear if the underlying report is underconsidering the other products.

It also estimates that LLM companies will capture 2% of the digital advertising market, which seems kind of low to me. There will be challenges in capturing it and challenges with user trust, but it seems super promising because it will likely be harder to block and has a lot of intent context that should make it like search advertising++. And for context, search advertising is 40% of digital ad revenue.

Seems like the error bars have to be pretty big on these estimates.

  The team also assumes LLM companies will capture 2 per cent of the digital advertising market in revenue, from slightly more than zero currently.

I think people are severely underestimating ChatGPT as a way to make money other than subscriptions. I also think people are underestimating the branding power ChatGPT has already. All my friends have ChatGPT on their phone. None of them except me has Gemini or Claude app.

This doesn't account for OpenAI's other ambitions such as Sora app.

Hey Sam Altman or OpenAI employee, if you are reading this, I think you should buy the North American version of TikTok if the opportunity presents itself. The future of short videos will be heavily AI generated/assisted. Combine Tiktok's audience with your Sora tools and ChatGPT data and you got yourself a true Instagram competitor immediately. If the $14b sales price of US Tiktok is real, that's an absolute bargain in the grand scheme of things.

I'll call out two of them.

Image, video, and other content generation is going to become more important and companies will be spending on that. We've seen some impressive improvements there. IMHO near term a lot of that stuff might start showing up in advertising and news content, the whole media industry is going to be a massive consumer of this stuff. And there's going to be a lot of competition for the really high quality models that can be run at scale. Five years until 2030 is a lot of time for some pretty serious improvements to land.

Another area that the article skips over is agentic tools. Those are showing a lot of promise right now. Agentic coding tools are just the tip of the iceberg here. A lot of these tools are going to be using APIs. So API revenue is a source of revenue. There are applications across the entire IT industry. SAAS, legacy software, productivity tools, etc.

Yes 207B is a lot of money. And there's no guarantee that OpenAI comes out on top "winning" all these markets of course and we can argue about how big these markets will be. But OpenAI does have a good starting position and some street credibility here. It's a big bet on revenue and potential here. But so is betting against all that and dismissing things. And there's a lot of middle ground here.

The LLMs will create new content, but they aren't creating new business channels in the advertising industry. As an example even once Google achieved search domination they still didn't have this. They had purchase a lot of things to make that happen like Urchin, Adscape, DoubleClick, YouTube, and a lot more.

Hideous idea as it is, I fully expect they break even in 2026.

[0]: https://openai.com/index/chatgpt-shopping-research/

Seems crazy by most software standards, but when Bloomberg became a software only program (they stopped selling physical terminals) and people were shocked when they paid almost nothing for excel but then so much for the second tool they needed as traders.

Yet it still is priced so high and people pay.

There are adjacancies in white collar work like financial analysis that they will go after. All these will capture high ARPU usage.

Consumer is not their only path to revenue but it is probably the easiest to model. The enterprise play to automate and accelerate some white collar workers is a clear target not reflected here.

I think beyond the number of crazy assumptions (no Google taking market share in the consumer market?? only 2% of digital advertising expected to be captured by OpenAI?) it is hard to nail down which levers could move which might make this funding hole disappear.

"OpenAI needs to raise at least $207bn by 2030 so it can continue to lose money"

Full title: (95 chars)

"OpenAI needs to raise at least $207bn by 2030 so it can continue to lose money, HSBC estimates"

OpenAI has many plausible monetization avenues. (Whether it will execute on them -- a fair question. But acting like they just don't exist is low IQ.)

Take ONE example: online shopping.

Online shopping is $6-7 trillion per year, growing 7% annually.

Suppose ChatGPT captures 10% of that with a 5% fee. (Marketplaces like Amazon and Walmart charge 15%. Ebay is 5%.) That's $200B over five years.

It potentially looks like Google and OpenAI will take this new market.

1. AI becomes better, causes more fear, public uproar, arms race between China/US

2. AI becomes a government project, big labs merge, major push into AI for manipulation, logistics, weapons development/control

3. ????

4. Utopia or destruction

An LLM, in addition to being unable to ever obtain true AGI because of the linear and singular representation of concepts and data, cannot combine multiple schemas or metadata from multiple contexts with its own training and reinforcement data.

That means it cannot truly remember and correct its mistakes. A mistake is more than the observation and correction, it is applying global changes to both your metadata and schema of the event and surrounding data.

LLMs as an AI solution is a dead end.

AI credits will likely replace current money anyway

If ChatGPT is delivering that, they should have no problem raising money.

1. Make AGI

2. ???

3. Infinite profit!

Sure OpenAI may well be bleeding money into the 2030s, or may even go bust completely depending on how pessimistic you are, but the analysis completely skips:

- They are building their own data centers, and will be less reliant on renting compute from Microsoft and Amazon over time.

- Once the AI bubble has subsided costs for GPU purchases and rentals will decrease significantly. Plus there will be more advancements and competition in the space (e.g. Google TPUs) and Nvidia will no longer be able to name their own price.

- We will write more efficient software for training and inference.

- Once user growth is tapped out OpenAI will no longer need to have the overly generous free tier that they do today. And if they decide to turn up the advertising faucet these users could bring in a ton more revenue than in the projection. Thinking that every AI company combined will capture only 2% of the total digital advertising market is ridiculous. AI apps are already challenging social media for scrolling time.

Basically, the entire space is evolving so rapidly that it's pointless to make a projection with the assumption that the landscape isn't going to change from here on.

If they capture it fully that would only mean that OpenAI gets a portion of the engineering spend (because it is supposed to save on engineering salaries) which is a portion of the total spend which is almost always less than the total revenue.

Now estimate the total revenue of all software companies combined in the world and look at their engineering spend and a faction of that is what OpenAI can have in best case scenario.

So... Bubble.

Meanwhile ungodly amounts of money are being used so some boomer can generate a AI video of a baby riding a puppy.

If their business isn't sustainable they should go bankrupt, and close shop.

What is this saying? Is this sarcastic?

I don't know anybody with a Microsoft 365 subscription.

I suppose the cloud storage is nice, but you can do much better; Google gives you double that for the same price ($99/yr).