OpenAI Is a Systemic Risk to the Tech Industry

Summary

Before we go any further: I hate to ask you to do this, but I need your help — I'm up for this year's Webbys for the best business podcast award. I know it's a pain in the ass, but can you sign up and vote for Better Offline? I have never won an award in my life, so help me win this one.Soundtrack: Mastodon - High RoadI wanted to start this newsletter with a pithy anecdote about chaos, both that caused by Donald Trump's tariffs and the brittle state of the generative AI bubble.Instead, I am going to write down some questions, and make an attempt to answer them.How Much Cash Does OpenAI Have?Last week, OpenAI closed "the largest private tech funding round in history," where it "raised" an astonishing "$40 billion," and the reason that I've put quotation marks around it is that OpenAI has only raised $10 billion of the $40 billion, with the rest arriving by "the end of the year." The remaining $30 billion — $20 billion of which will (allegedly) be provided by SoftBank — is partially contingent on OpenAI's conversion from a non-profit to a for-profit by the end of 2025, and if it fails, SoftBank will only give OpenAI a further $20 billion. The round also valued OpenAI at $300 billion.To put that in context, OpenAI had revenues of $4bn in 2024. This deal values OpenAI at 75 times its revenue. That’s a bigger gulf than Tesla at its peak market cap — a company that was, in fact, worth more than all other legacy car manufacturers combined, despite making far less than them, and shipping a fraction of their vehicles. I also want to add that, as of writing this sentence, this money is yet to arrive. SoftBank's filings say that the money will arrive mid-April — and that SoftBank would be borrowing as much as $10 billion to finance the round, with the option to syndicate part of it to other investors. For the sake of argument, I'm going to assume this money actually arrives.Filings also suggest that "in certain circumstances" the second ($30 billion) tranche could arrive "in e...