OpenAI's Shift to For-Profit: A Turning Point in AI Development

Why OpenAI is becoming a for-profit business

OpenAI's plans to restructure as a for-profit business mark a significant departure from its roots as a non-profit research lab grounded in a commitment to build artificial intelligence (AI) to "benefit humanity." However, the latest changes represent the culmination of a yearslong shift away from the ChatGPT maker's foundations and toward a typical for-profit startup, experts told The Hill. "Restructuring around a core for-profit entity formalizes what outsiders have known for some time: that OpenAI is seeking to profit in an industry that has received an enormous influx of investment in the last few years," said Sarah Kreps, director of Cornell University's Tech Policy Institute. Reports first emerged last week that OpenAI was considering restructuring into a public benefit corporation, a for-profit entity aimed at bettering society, and removing the non-profit board's control over the company. The shift comes as part of an effort to attract investors amid OpenAI's latest fundraising round, which it announced Wednesday had secured $6.6 billion in new funding at a valuation of $157 billion. The news of its potential restructuring was accompanied by the departure of several top OpenAI executives, including chief technology officer Mira Murati. The latest resignations followed a series of departures earlier this year, including OpenAI co-founders Ilya Sutskever and John Schulman and machine learning researcher Jan Leike. OpenAI CEO Sam Altman has sought to dispel any speculation that the recent departures are related to the company's restructuring plans. "We have been thinking about that, our board has, for almost a year, independently, as we think about what it takes to get to our next stage," Altman said at Italian Tech Week in Turin last Thursday, according to Reuters. Even if unconnected, the turnover at OpenAI and its restructuring plans appear to signal a shift in focus, Kreps noted. "At least circumstantially, these changes - the shifting emphasis to for-profit, turnover at the top, as well as the dissolution of OpenAI's super alignment team that focused on AI risk - points to an accelerated move into the boundary-pushing directions of AI research," she said in a statement. OpenAI dissolved its Superalignment team in May shortly after Sutskever and Leike announced their departures. The pair ran the team, formed less than a year earlier, that sought to address the potential dangers of superintelligence -- AI that is smarter than humans. "The moves collectively mark a potential departure from the company's founding emphasis on safety, transparency, and an aim of not concentrating power in the development of artificial general intelligence," Kreps added. OpenAI was founded in 2015 as non-profit AI research company with the goal of developing the technology in a way "that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return." It emphasized that as a non-profit, it would seek to "build value for everyone rather than shareholders." The company began shifting away from its non-profit foundations in 2019, when it announced plans to restructure as a "capped-profit company." Under the new structure, investors could receive a return up to 100 times their original investment, with the remaining profits going toward the non-profit. OpenAI's non-profit board would also control the company. The company explained at the time that its decision was driven by a desire to be able to raise more money for its efforts "while still serving our mission." This unique structure would ultimately result in the drama that unfolded at the company last November, when the non-profit board briefly ousted Altman as CEO in a surprise maneuver. After several days of chaos, in which hundreds of OpenAI employees threatened to resign, the company brought Altman back as CEO and formed a new board, removing all but one of the members who had been part of the ouster. "The circus show and the comedy show that happened in the potential coup d'etat of OpenAI last fall, that was the straw that broke the camel's back, where this model couldn't work," Wedbush Securities analyst Dan Ives told The Hill. Ives said he sees no way OpenAI could have stayed a non-profit, especially after the 2022 release of its incredibly popular ChatGPT tool. "It was a matter of time that this was going to happen, and they ripped the band-aid off," he said, adding, "I think it was known within the industry, known within the venture community, known on the Street, that this would happen." "They're a victim of their own success," Ives added. "If they didn't have a moment that would really change the tech, and I'd say enterprise consumer landscape going forward, we wouldn't be talking about change to a for-profit model." Even as a non-profit or a "capped-profit" company, critics have long questioned OpenAI's commitment to its founding ideals. "There's been a big question for a long time around about whether OpenAI is really grounded in the public interest mission that it was founded on, and whether the fact that it's a non-profit means anything at all," said Mark Surman, president of Mozilla Foundation, which has been an advocate for open-source AI. He suggested the move to restructure the company could provide clarity on this front. "Something good might come out of this move to take it private, which is just to put OpenAI in a position where it has to be honest about what it is," Surman said. "It's a fast moving, mid-stage, very successful startup." "We also need publicly oriented, open-source AI that is built in a way that has safety in mind and that everybody can rely on," he argued. "Let's just not fool ourselves that OpenAI is a path to that." Similar complaints were at the center of a lawsuit that billionaire tech mogul Elon Musk filed against Altman and OpenAI in May. Musk, who helped found the company, alleged that Altman and fellow co-founder Greg Brockman "assiduously manipulated Musk into co-founding their spurious non-profit venture." "After Musk lent his name to the venture, invested significant time, tens of millions of dollars in seed capital, and recruited top Al scientists for OpenAI Inc., Musk and the non-profit's namesake objective were betrayed by Altman and his accomplices," the lawsuit reads. These concerns about OpenAI's commitment to its founding ideals also highlight the need for regulation, said Julia Stoyanovich, director of the Center for Responsible AI at New York University. "This really underscores that OpenAI never really meant to be thinking about the well-being of everybody as a central priority and this was always on their mind that they are a commercial entity," Stoyanovich told The Hill. "Now this is abundantly clear, and we need to step up our efforts to regulate the use of the technology that they produce to make sure that they don't destroy society further," she added.

OpenAI Pivoting From "Benefiting Humanity" to "Making Lots of Money"

This week, OpenAI announced that it would be ripping control away from its nonprofit arm, finally putting to bed any appearance that the company is truly committed to developing an artificial general intelligence that would "benefit all of humanity." While we don't know exactly what the ChatGPT maker's new structure will look like quite yet, it feels assured that CEO Sam Altman will end up with vastly more control over the company's operations. Altman could also realize new equity worth billions of dollars as the company sidelines its nonprofit board. In short, the company's namesake nonprofit roots are in the rearview mirror as it doubles down on making money. The company has turned into a cash magnet in a matter of just two years, going from a $14 billion valuation in 2021 to potentially $150 billion this year, according to its latest round of fundraising. "We can say goodbye to the original version of OpenAI that wanted to be unconstrained by financial obligations," OpenAI safety researcher Jeffrey Wu told Vox. "Restructuring around a core for-profit entity formalizes what outsiders have known for some time: that OpenAI is seeking to profit in an industry that has received an enormous influx of investment in the last few years," added Cornell Tech Policy Institute director Sarah Kreps in the same piece. On Wednesday, Reuters reported that OpenAI was looking to restructure its core business into a "for-profit benefit corporation," putting it on a similar footing to its rivals like AI company Anthropic, itself started by former OpenAI staff. The shakeup proved controversial, with a number of high-ranking executives including OpenAI's chief technology officer Mira Murati, VP of research Barret Zoph, and chief research officer Bob McGrew, abruptly announcing their departures. The new structure could create entirely different and potentially dangerous incentives for investors. "The general public and regulators should be aware that by default, AI companies will be incentivized to disregard some of the costs and risks of AI deployment -- and there's a chance those risks will be enormous," Wu told Vox. The company started off in 2015 as a "nonprofit artificial intelligence research company" that was committed to advancing the tech "in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return." In 2019, shortly after Altman took over the reins, OpenAI created a so-called "capped profit" subsidiary to raise some much-needed cash, while still limiting the amount of profit investors could get out of it. Half a decade later, and the company looks practically unrecognizable. Its unabashed pursuit of multibillion-dollar cash injections has stripped it of its once benevolent and seemingly altruist sheen. "In a way, all of the changes announced yesterday simply demonstrate to the public what has long been happening within the company," The Atlantic's Karen Hao wrote in a piece titled "OpenAI Takes Its Mask Off," referring to reports of the impending restructuring. "The nonprofit has continued to exist until now," she added. "But all of the outside investment -- billions of dollars from a range of tech companies and venture-capital firms -- goes directly into the for-profit, which also hires the company's employees." The latest executive departures are far from the first upper talent OpenAI has lost ever since last year's power struggle, which saw Altman be fired, only to be rehired five days later. The company has also lost one of its original cofounders Ilya Sutskever, and a founding research scientist John Schulman. In other words, massive executive shakeups have left a lot of control in the hands of the company's embattled but surviving CEO. Hao argued that the latest reshuffling "suggests that Altman's consolidation of power is nearing completion." "For the first time, OpenAI's public structure and leadership are simply honest reflections of what the company has been -- in effect, the will of a single person," she wrote. "'Just: Sam.'"

A for-profit OpenAI? Huh. What would it be good for?

Opinion Once upon a time, OpenAI was purely a non-profit. Really. It was established in December 2015 as a non-profit AI research organization. Now it appears increasingly likely that OpenAI will become a for-profit company. OpenAI, of course, has declined to comment on multiple reports on any moves to become a for-profit entity, but the wording of its statement to The Register yesterday was telling: "The non-profit is core to our mission and will continue to exist." Currently, its structure is what it describes as a "partnership" between its original non-profit and a "capped profit arm." As for Sam Altman, one of OpenAI's co-founders, he is very much at the helm again and has presided over the company during some of the most recent changes. Altman founded Loopt, a smartphone location-based social networking app, in 2005. It then became one of the first companies to be accepted into Y Combinator, one of the top venture capitalist groups. He promptly sold Loopt and joined Y Combinator as a partner. By 2014, he had become Y Combinator's president. Then along came OpenAI, which could take Altman from ordinary rich - about two billion or so - to, well, whatever OpenAI ends up being valued at if it finally hits the stock market. I expect he's hoping for OpenAI to hit trillion-dollar valuations. An IPO might not be the first step, of course. Rivals Anthropic and xAI are both "public benefit corporations," or PBCs, which operate as for-profits but are not actually publicly listed. Shareholders still expect PBCs to bring them a return on their investment, though. Meanwhile, Bret Taylor, chairman of the OpenAI board, told Bloomberg this week that the "board has had discussions about whether it would be beneficial to the company and our mission to have Sam be compensated with equity, but no specific figures have been discussed nor have any decisions been made." Getting everyone else at OpenAI on board with a for-profit move would not have been easy. Not everyone likes what have been described as Altman's "secretive for-profit" plans. In 2023, the board fired Altman for not being "consistently candid in his communications," although it never clarified what these were. Meanwhile relationships with some of the other founders were foundering. Some guy named Elon Musk - you may have heard of him - another OpenAI cofounder and investor - had tweeted months earlier that "OpenAI was created as an open source (which is why I named it 'Open' AI), non-profit company to serve as a counterweight to Google, but now it has become a closed source, maximum-profit company effectively controlled by Microsoft. Not what I intended at all." OpenAI rejected his claims, responding at the time: "We couldn't agree to terms on a for-profit with Elon because we felt it was against the mission for any individual to have absolute control over OpenAI." In only a matter of days after Altman's November 2023 ousting, he was back in the CEO saddle again. Since then, OpenAI co-founder and Chief Scientist Ilya Sutskever quit. Now, several months later, CTO Mira Murati, Chief Research Officer Bob McGrew, and Research VP Barret Zoph have all left the company. No one I can think of would ever quit a job with potential stock options worth billions, but to each their own. One could speculate, as many have, that OpenAI's next investors - Thrive Capital, Khosla Ventures, Nvidia, and Apple - might insist on a restructure in return for investing $6.5 billion in it. They'd also perhaps make it clear that OpenAI would have to remove its investors' profit cap. Would a for-profit OpenAI be worth it? Gary Marcus, an AI analyst with no love for OpenAI, wrote: "GPT-5 hasn't dropped, Sora hasn't shipped, the company had an operating loss of $5 billion last year, there is no obvious moat, Meta is giving away similar software for free, many lawsuits pending... Absolutely insane." I'm inclined to agree with Marcus. Altman has become AI's high priest. His recent essay, The Intelligence Age, is AI hype taken to new heights. According to Altman, AI will lead to "shared prosperity to a degree that seems unimaginable today; in the future, everyone's lives can be better than anyone's life is now." Funny that. I'm a writer with about 15 million published words to my credit, and I haven't seen a check from any AI maker for letting it use my work to train its models. Indeed, OpenAI has said it would be "impossible" to build top-tier neural networks that meet today's needs without using people's copyrighted work. If AI makers really want to show that it will make life better for everyone, how about settling all the copyright lawsuits? Or perhaps they agree with Mustafa Suleyman, Microsoft AI CEO, that any content on the web is "freeware" that anyone can use. Or with Meta CEO Mark Zuckerberg, who said: "Individual creators or publishers tend to overestimate the value of their specific content." AI companies are building billions of dollars on the work of writers, artists, and other creators who rarely get paid thousands for their work. According to ZipRecruiter, the average freelance writer or writer gets paid $23 an hour. I see the Silicon Valley AI tech bros making millions and billions. The people who made the content their LLMs rely upon? Not so much. Besides, as famous software engineer Grady Booch recently said of Altman's "few thousand days" prediction of how long it will take before AI is all-knowing and wonderful: "I am so freaking tired of all the AI hype: it has no basis in reality and serves only to inflate valuations, inflame the public, garnet [sic] headlines, and distract from the real work going on in computing." I wouldn't go that far. AI does have some real value. But as much value as investors are dreaming of? I doubt it. I also doubt that anyone other than AI companies will end up sharing much of that value, whether they are creators or companies dreaming of replacing employees with AI engines. ®

OpenAI shift to for-profit company may lead it to cut corners, says whistleblower

William Saunders, a former research engineer at the startup, concerned about who will make safety decisions OpenAI's plan to become a for-profit company could encourage the artificial intelligence startup to cut corners on safety, a whistleblower has warned. William Saunders, a former research engineer at OpenAI, told the Guardian he was concerned by reports that the ChatGPT developer is preparing to change its corporate structure and will no longer be controlled by its non-profit board. Saunders, who flagged his concerns in testimony to the US Senate this month, said he was also concerned by reports that OpenAI's chief executive, Sam Altman, could hold a stake in the restructured business. "I'm most concerned about what this means for governance of safety decisions at OpenAI," he said. "If the non-profit board is no longer in control of these decisions and Sam Altman holds a significant equity stake, this creates more incentive to race and cut corners." OpenAI was founded as a non-profit entity and its charter commits the startup to building artificial general intelligence (AGI) - which it describes as "systems that are generally smarter than humans" - that benefits "all of humanity". However, the potential power of an AGI system has alarmed experts and practitioners including Saunders, amid fears that the competitive race to build such technology could lead to safety concerns being overridden. Saunders said in written testimony to the Senate that he left the company because he "lost faith" that OpenAI would make responsible decisions about AGI. Saunders was a member of staff on OpenAI's superalignment team, a now-dissolved group tasked with ensuring that powerful AI systems adhere to human values and aims. Saunders has now said that a switch to a for-profit entity could undermine the aims of the structure in place now, in which OpenAI has a profit-making entity that caps returns to investors and employees. All profit generated above that cap is returned to the non-profit for "the benefit of humanity". Saunders said a purely for-profit entity may not distribute its proceeds back to society if, for instance, it developed technology that made a significant number of jobs obsolete. "OpenAI was supposed to only allow limited profit for investors and employees, and give the rest to the non-profit," he said. "Then if OpenAI made AI technology that caused large-scale unemployment, they wouldn't be just pocketing the profits themselves and would give back to society. Switching to a for-profit suggests this is no longer a priority." OpenAI has been contacted for comment. Its charter states that the company is "committed to doing the research required to make AGI safe" and it recently made its safety and security committee an independent entity, which also involved Altman stepping down as one of its members. OpenAI is reportedly considering restructuring as a public benefit corporation, which has no cap on its profits but is committed to making a positive impact on society. Reuters also reported this week that the non-profit entity would hold a stake in the new business. OpenAI has declined to comment on the specifics of the restructuring but has said the non-profit organisation would continue to exist. In a statement issued on Thursday, OpenAI's chair, Bret Taylor, said the board had discussed giving Altman a stake in the business but no specific figures had been discussed. It has been reported that Altman may be given a 7% stake in OpenAI, which is seeking $6.5bn of investment in fundraising that could lead it to be valued at $150bn. "The board has had discussions about whether it would be beneficial to the company and our mission to have Sam be compensated with equity, but no specific figures have been discussed nor have any decisions been made," he said.

Sam Altman Cooks ASI with OpenAI's $6.6 Bn Investment

Sam Altman believes that artificial superintelligence is just a few thousand days away. The hottest AI startup, OpenAI, recently raised $6.6 billion at a valuation of $157 billion. The latest round of funding, led by existing investor Thrive Capital, has brought OpenAI's total capital raised to $17.9 billion, according to Crunchbase. Thrive Capital contributed approximately $1.3 billion, with the option to invest an additional $1 billion at the same valuation through 2025. Other major participants in this funding round include Microsoft, NVIDIA, SoftBank, Khosla Ventures, Altimeter Capital, Fidelity, and MGX. The Wall Street Journal reported that Microsoft's contribution was just under $1 billion, while NVIDIA committed $100 million, and SoftBank invested $500 million. Previously reported to be participating, Apple was notably absent from the investment round. "The new funding will allow us to double down on our leadership in frontier AI research, increase compute capacity, and continue building tools that help people solve hard problems," the company said in a blog post. That explains why it is hiring people aggressively across various job roles, both old and new, including frontiers infrastructure engineer and GPU kernel engineer. Meanwhile, OpenAI is planning to restructure itself into a for-profit public benefit corporation. This marks a shift from its current structure, which includes a non-profit board overseeing a for-profit subsidiary. Altman could also receive an equity stake in the restructured company, though specific figures haven't been confirmed yet. The ChatGPT maker is expecting about $5 billion in losses on $3.7 billion in revenue this year. The funding came on the heels of the company's DevDay 2024 event, where several important announcements were made. These included real-time APIs, vision integration in the fine-tuning API, prompt caching (with 50% discounts and faster processing for recently seen input tokens), and model distillation. However, the past few days have not been smooth for OpenAI, as its CTO, Mira Murati, announced her resignation after being associated with the company for over six years. She said that she was "stepping away because I want to create the time and space to do my own exploration". Bob McGrew, the chief research officer, also announced his departure, simply saying, "It is time for me to take a break." McGrew had been with OpenAI since August. Barret Zoph, the vice president of research, also resigned alongside Murati and McGrew, describing his departure as a "personal decision based on how I want to evolve in the next phase of my career". Regarding the leadership changes, Altman said, "Leadership changes are a natural part of companies, especially companies that grow so quickly and are so demanding." He added that he obviously won't pretend it's natural for this one to be so abrupt, but "we are not a normal company", he said. Altman describes being a leader at OpenAI as "all-consuming". "On the one hand, it's a privilege to build AGI and be the fastest-growing company that gets to put our advanced research in the hands of hundreds of millions of people. On the other hand, it's relentless to lead a team through it," he said. Despite the departure of many people from OpenAI, Altman is not worried about the company, as he believes its mission is strong enough to sustain it. He also believes that, despite OpenAI raising substantial funds, it remains a research-focused organisation. "We'll do whatever works to build safe AGI and figure out how to share the benefits," said Altman in a fireside chat at DevDay 2024. "If the answer is a rack of GPUs, we'll do that. Right now, the answer is to really push on research, and I think you see this with o1. That is a giant research breakthrough that we were attacking from many vectors over a long period of time that came together in this really powerful way. We have many more giant research breakthroughs to come." He further added that OpenAI knows how to integrate research and product development. "The fact that we married product and research and all this other stuff together is that we know how to run that kind of a culture that can go -- push back the frontier. That's really hard, but we love it," he said. Altman believes that the arrival of artificial superintelligence is just a few thousand days away. In a recent blog post, titled 'The Intelligence Age', Altman said that, "It is possible that we will have superintelligence in a few thousand days (!); it may take longer, but I'm confident we'll get there." However, Altman said that they need to bring down the cost of compute and make it abundant, which requires a lot of energy and chips. "If we don't build enough infrastructure, AI will be a very limited resource that wars get fought over and that becomes mostly a tool for rich people." OpenAI researcher Noam Brown, in a recent podcast, said that the significance of the new o1 model is 'profound' because it represents a new dimension for scaling AI models in the domain of inference-time compute, and that "the ceiling is a lot higher than a lot of people have appreciated". Similarly, Altman recently mentioned that "o1-preview is deeply flawed, but when o1 comes out, it will feel like a major leap forward". He described o1-preview as being at the "GPT-2 stage" of reasoning development. "I think of this as like we're at the GPT-2 stage of these new kinds of reasoning models," he explained and stressed that while the model is still early in its development, significant improvements are expected in the coming months. "Before the end of the year, o1 will support function calling along with system prompts and structured output," he said. Moreover, Altman has defined five levels of AI development, the first stage being chatbots, followed by reasoners, which the company claims has now been achieved. The next phases are agents, innovators capable of scientific discovery, and fully autonomous organisations. "OpenAI is evil," Musk posted soon after the funding announcement. This comes in the backdrop of OpenAI asking its investors not to back rival companies, including Anthropic, Elon Musk's xAI, Safe Superintelligence (founded by former OpenAI co-founder Ilya Sutskever), search startup Perplexity AI, and enterprise search firm Glean. Notably, xAI raised $6 billion earlier this year, while Safe Superintelligence secured $1 billion and Anthropic raised $7.3 billion over the past year through various funding rounds and commitments. At DevDay, Altman mentioned how companies everywhere were trying to copy OpenAI. "We really deeply care about research. I think it's easy to copy something you know works, and I actually don't mean that as a bad thing. When people copy OpenAI, I'm like, great -- the world gets more AI, that's wonderful. But to do something new for the first time and find the new paradigm one after the another that is what motivates us." In another development, xAI recently relocated to a new office in the Mission district in San Francisco, specifically in the same building that housed OpenAI's headquarters for several years. "It's my building. That's where we created OpenAI (as an open source, non-profit!!) and Neuralink," posted Musk on X, showing his evident frustration with OpenAI.

Sam Altman Cooks Artificial Superintelligence (ASI) with OpenAI's $6.6 Bn Investment

Sam Altman believes that artificial superintelligence is just a few thousand days away. The hottest AI startup, OpenAI, recently raised $6.6 billion at a valuation of $157 billion. The latest round of funding, led by existing investor Thrive Capital, has brought OpenAI's total capital raised to $17.9 billion, according to Crunchbase. Thrive Capital contributed approximately $1.3 billion, with the option to invest an additional $1 billion at the same valuation through 2025. Other major participants in this funding round include Microsoft, NVIDIA, SoftBank, Khosla Ventures, Altimeter Capital, Fidelity, and MGX. The Wall Street Journal reported that Microsoft's contribution was just under $1 billion, while NVIDIA committed $100 million, and SoftBank invested $500 million. Previously reported to be participating, Apple was notably absent from the investment round. "The new funding will allow us to double down on our leadership in frontier AI research, increase compute capacity, and continue building tools that help people solve hard problems," the company said in a blog post. That explains why it is hiring people aggressively across various job roles, both old and new, including frontiers infrastructure engineer and GPU kernel engineer. Meanwhile, OpenAI is planning to restructure itself into a for-profit public benefit corporation. This marks a shift from its current structure, which includes a non-profit board overseeing a for-profit subsidiary. Altman could also receive an equity stake in the restructured company, though specific figures haven't been confirmed yet. The ChatGPT maker is expecting about $5 billion in losses on $3.7 billion in revenue this year. The funding came on the heels of the company's DevDay 2024 event, where several important announcements were made. These included real-time APIs, vision integration in the fine-tuning API, prompt caching (with 50% discounts and faster processing for recently seen input tokens), and model distillation. However, the past few days have not been smooth for OpenAI, as its CTO, Mira Murati, announced her resignation after being associated with the company for over six years. She said that she was "stepping away because I want to create the time and space to do my own exploration". Bob McGrew, the chief research officer, also announced his departure, simply saying, "It is time for me to take a break." McGrew had been with OpenAI since August. Barret Zoph, the vice president of research, also resigned alongside Murati and McGrew, describing his departure as a "personal decision based on how I want to evolve in the next phase of my career". Regarding the leadership changes, Altman said, "Leadership changes are a natural part of companies, especially companies that grow so quickly and are so demanding." He added that he obviously won't pretend it's natural for this one to be so abrupt, but "we are not a normal company", he said. Altman describes being a leader at OpenAI as "all-consuming". "On the one hand, it's a privilege to build AGI and be the fastest-growing company that gets to put our advanced research in the hands of hundreds of millions of people. On the other hand, it's relentless to lead a team through it," he said. Despite the departure of many people from OpenAI, Altman is not worried about the company, as he believes its mission is strong enough to sustain it. He also believes that, despite OpenAI raising substantial funds, it remains a research-focused organisation. "We'll do whatever works to build safe AGI and figure out how to share the benefits," said Altman in a fireside chat at DevDay 2024. "If the answer is a rack of GPUs, we'll do that. Right now, the answer is to really push on research, and I think you see this with o1. That is a giant research breakthrough that we were attacking from many vectors over a long period of time that came together in this really powerful way. We have many more giant research breakthroughs to come." He further added that OpenAI knows how to integrate research and product development. "The fact that we married product and research and all this other stuff together is that we know how to run that kind of a culture that can go -- push back the frontier. That's really hard, but we love it," he said. Altman believes that the arrival of artificial superintelligence is just a few thousand days away. In a recent blog post, titled 'The Intelligence Age', Altman said that, "It is possible that we will have superintelligence in a few thousand days (!); it may take longer, but I'm confident we'll get there." However, Altman said that they need to bring down the cost of compute and make it abundant, which requires a lot of energy and chips. "If we don't build enough infrastructure, AI will be a very limited resource that wars get fought over and that becomes mostly a tool for rich people." OpenAI researcher Noam Brown, in a recent podcast, said that the significance of the new o1 model is 'profound' because it represents a new dimension for scaling AI models in the domain of inference-time compute, and that "the ceiling is a lot higher than a lot of people have appreciated". Similarly, Altman recently mentioned that "o1-preview is deeply flawed, but when o1 comes out, it will feel like a major leap forward". He described o1-preview as being at the "GPT-2 stage" of reasoning development. "I think of this as like we're at the GPT-2 stage of these new kinds of reasoning models," he explained and stressed that while the model is still early in its development, significant improvements are expected in the coming months. "Before the end of the year, o1 will support function calling along with system prompts and structured output," he said. Moreover, Altman has defined five levels of AI development, the first stage being chatbots, followed by reasoners, which the company claims has now been achieved. The next phases are agents, innovators capable of scientific discovery, and fully autonomous organisations. "OpenAI is evil," Musk posted soon after the funding announcement. This comes in the backdrop of OpenAI asking its investors not to back rival companies, including Anthropic, Elon Musk's xAI, Safe Superintelligence (founded by former OpenAI co-founder Ilya Sutskever), search startup Perplexity AI, and enterprise search firm Glean. Notably, xAI raised $6 billion earlier this year, while Safe Superintelligence secured $1 billion and Anthropic raised $7.3 billion over the past year through various funding rounds and commitments. At DevDay, Altman mentioned how companies everywhere were trying to copy OpenAI. "We really deeply care about research. I think it's easy to copy something you know works, and I actually don't mean that as a bad thing. When people copy OpenAI, I'm like, great -- the world gets more AI, that's wonderful. But to do something new for the first time and find the new paradigm one after the another that is what motivates us." In another development, xAI recently relocated to a new office in the Mission district in San Francisco, specifically in the same building that housed OpenAI's headquarters for several years. "It's my building. That's where we created OpenAI (as an open source, non-profit!!) and Neuralink," posted Musk on X, showing his evident frustration with OpenAI.

Ghosts of the venture capital bubble haunt OpenAI's $229b moment

"The common theme for the whole story is we're learning. We're really not sure that we know the answer, therefore we're taking our time." That's just as well. Neumann was infamously forced out as CEO of WeWork in late 2019, after the company's float spectacularly fell over. At one stage, a capital raising valued the company at $US47 billion. But when WeWork finally went public in 2021, it was worth just $9 billion, and would collapse into bankruptcy - but not before Neumann's attempt to buy the business back fell over. The drama around WeWork's surging valuation, its failed float and Neumann's ultimate removal from the company became a symbol of the speculative froth unleashed by ultra-low interest rates and irrational gambling by cashed-up investors. As it turned out, Neumann and WeWork were simply a sign of what was to come. A few years later, pandemic-era stimulus unleashed an even bigger wave of speculation in public and private markets. Start-ups with similarly sketchy models were handed even bigger cheques, written at ever-increasing rates. Today, with interest rates having risen harder and faster than any time in the past 40 years, the world looks very different. Or does it? Neumann's sudden re-emergence wasn't the only throwback to those days of the start-up bubble. The announcement of the largest venture capital deal in history was a reminder that the animal spirits of the recent past are far from extinguished. OpenAI, the creator of ChatGPT, announced on Wednesday night that it had completed a $US6.6 billion ($9.59 billion) funding round that will value the company at a staggering $US157 billion, or 82 per cent higher than the $US86 billion valuation it last traded at earlier this year. There are several remarkable things about the deal, not least of which is that OpenAI isn't actually a business - this fund-raising round is essentially contingent on OpenAI shedding its current not-for-profit status and becoming a for-profit company. Some investors could get their money out if it doesn't make that leap. While OpenAI chief executive Sam Altman has portrayed the for-profit transition as a natural part of the organisation's evolution, it has also led to intense internal turmoil, with a swag of executives and co-founders, including chief technology officer Mira Murati, departing this year. While the success of ChatGPT means OpenAI remains at the forefront of the AI revolution, this is still a business that is in the early stages of financial maturation. Reports suggest revenue is expected to climb from $US3.7 billion to $11.6 billion 2025, with OpenAI boasting 250 million weekly active users, 11 million paying subscribers and about 1 million business customers. But the company is far from profitable, and is expected to lose about $US5 billion this year. It's wrong to compare a company such as OpenAI, which is at the vanguard of an important technological revolution, to WeWork, which had one of the dumbest business models (expensive long-term lease obligations matched with an inherently short-term customer base) in history. But it is notable that one of the biggest investors in OpenAI's latest funding round is Japanese giant SoftBank, which is reported to have invested $US500 million. SoftBank and its talismanic founder, Masayoshi Son, were famously among the last punters at the table at WeWork - the investment giant was the leader of a January 2019 capital raising that valued Neumann's company at $US47 billion and reportedly pumped $US11.5 billion of equity and $US2 billion in debt into the co-working business. After being ridiculed for that bet and several other failures, Son has got his groove back in recent times; SoftBank shares hit a record high in June (they've since fallen 27 per cent) and the 3 per cent jump in the group's stock on Thursday morning suggests investors are more relaxed with the bet on OpenAI. But Masayoshi Son is not the only ghost of the pandemic froth to appear around the hoop at OpenAI. Tiger Global Management, a firm which invested in start-ups at the incredible rate of one a day in 2021, and subsequently suffered big losses on many of those bets, invested $US350 million in OpenAI. There's more than a whiff of the speculative mania of 2019 to early 2022 about this deal. Also on the ticket was Cathie Wood's Ark Invest, the tech-focused fund manager whose flagship ETF enjoyed gains of more than 300 per cent between March 2020 and February 2021, before losing about 70 per cent of its value. Ark invested $US250 million, which was apparently the minimum amount that would get you a look at OpenAI's documents. OpenAI's long-term tech partner Microsoft and AI chipmaker Nvidia also invested, while the round was led by a US venture giant Thrive Capital, which invested $US1.25 billion. The promise of AI is huge, and the spending occurring across the globe to chase this revolution is very big and very real. The $24 billion sale of Australian data centre giant AirTunk was predicated on $US1 trillion being invested into AI between now and 2030, and Wednesday night also brought an expansion of the partnership between consulting firm Accenture and Nvidia; that's a neat symbol of the rush inside the enterprise sector to deploy AI applications. There's also no question that OpenAI, for now at least, is at the very heart of this shift. But Altman appears to recognise that the competition is circling; why else would the terms of the funding round stipulate that investors are not allowed to invest in OpenAI's rivals, such as Anthropic, Safe Superintelligence and Elon Musk's xAI? Further, there is the nagging suspicion that generative AI won't generate the revenue or profit promised by the investment boom won't go away any time soon. The gains that users (both personal and business) are enjoying are, at this point, fairly limited, particularly compared to the costs of training and running generative AI models. In a decade's time, buying a slice of OpenAi at $US157 billion may prove to be the greatest investment ever. But there's more than a whiff of the speculative mania of 2019 to early 2022 about this deal: a loss-making company (that isn't actually supposed to make a profit), a gaggle of investors known for top-of-the-market bets, the "biggest ever deal" capital-raising label and hell of a lot of blue sky. Let's hope all parties have learned the lessons of that frothy moment. Because as Adam Neumann says: "We're really not sure that we know the answer."