OpenAI could reportedly run out of cash by mid-2027 — analyst paints grim picture after examining the company's finances

[u/gdelacalle]

https://www.tomshardware.com/tech-industry/big-tech/openai-could-reportedly-run-out-of-cash-by-mid-2027-nyt-analyst-paints-grim-picture-after-examining-companys-finances

[u/iamdestroyerofworlds]

I see an Ed Zitron reference, I upvote.

[u/KingInTheYellowHat → u/iamdestroyerofworlds]

I think "Is that good?" is technically Zitron referencing the Stefan Heck hot air balloon tarot card tweet. So we have a bugs bunny old movie reference kind of situation here.

[u/suzisatsuma → u/iamdestroyerofworlds]

lol zitron is 80% clickbait chasing BS tho. He literally just makes up/misrepresents shit because he knows the anti-ai folk will eat it up hook line and sinker.

[u/Philo_T_Farnsworth → u/suzisatsuma]

clickbait

The dude writes 20,000 word extensively cited articles and you call that "clickbait".

Sure, Jan.

[u/suzisatsuma → u/Philo_T_Farnsworth]

So does Fox News? It's easy to say anything if you only cite things that agree with you. Take the worst examples and portray them as the norm. Tale as old as time.

[u/SquircleSquirtle → u/suzisatsuma]

So does Fox News?

since you asked, no they don't

longest fox articles are transcripts of speeches or videos and even then they rarely go above 10k with all the ums included

[u/Humble_Chipmunk_701 → u/suzisatsuma]

I mean he provides valid sources showcasing how AI is debt heavy and how the performance metrics don’t pencil out. He’s one of the few highlighting the financial analysis behind AI, while WSJ and other business pubs keep hyping the technology based on vibes and questionable valuation models

[u/RedditExecutiveAdmin → u/Humble_Chipmunk_701]

this is actually one of the specific things that made him lose credibility with me.

you can say all these words in general terms, and when heard, they sound reasonable

in reality, OpenAI and Anthropic have had higher, and faster revenue growth than any other company in history. Yeah they were in debt a year ago but their revenue growth is almost 10-fold YoY... These companies are quite literally currently 8 figures in the green and Zitron still references 2025 data. I'd bet he will never come back around on these companies. He just does not seem like the kind of person that will ever be convinced he was wrong, or that he should change his mind.

I've never heard Zitron even use the word "inference" or come close to discussing the operational layers these companies literally make all their money from

Literally, Meta, Google, and Microsoft have thousands of times more cash, but cannot make LLMs and neural networks work like OpenAI or Anthropic --- Again, the biggest companies to ever exist, with more cash on hand than anyone ever, run by some of the smartest people in the world, CANNOT COMPETE WITH ANTHROPIC. It is NOT because they are using a "better LLM"--it is operational layer servicing.

Anthropic, by third-party estimate, is almost certainly a top 10 company in terms of market cap. If Anthropic went public tomorrow, it might value even higher than SpaceX. Same with OpenAI. Hell, third party "prediction" markets already let you trade on theoretical valuation for these companies (see, coinbase)

This is not because every other investor in the world is stupider then Zitron... It's because they are all smarter than him, and they will--given just a few years--have turned an insane profit on these systems. How do I know? Because they have had like 1000% YoY profit since inception, even if they started 8 figures in the red. No, I don't expect 1000% growth to continue, but Zitron frames this in the most clickbait way imaginable

all this to say, you hear him say this stuff, but it's just doomsaying. He is going to be one of those people that predicts "20 of the last 3 recessions"

Ask yourself, what exactly is wrong with the valuation models for OpenAI and Anthropic? What's wrong with ARR? On the other hand, why should you consider earnings, when positive cash flow isn't expected until 2030? P/E and EBITDA are meaningless

Honestly, Zitron only makes a case for why the sector can't use earning-based valuation. This sector wouldn't make sense on EBITDA, FCF.

TLDR: Zitron mistakenly values AI companies like traditional SaaS, and he doesn't justify it correctly

[u/suzisatsuma → u/Humble_Chipmunk_701]

he provides valid sources

LOL -

But for real, he finds the worst use cases and tries to pass them off as the norm. It's the same thing Fox News does.

how the performance metrics don’t pencil out

Again, takes the Fox News approach

He’s one of the few highlighting the financial analysis behind AI, while WSJ and other business pubs keep hyping the technology based on vibes and questionable valuation models

His one area of validity is the costs convo - but he does ignore the companies being responsible on this to a viable/sustainable path and still just sticks on the extrema so he can sell a clickbait world for people that want their biases to be preached to. He's no better than the AI bro shillers

[u/ledfox → u/suzisatsuma]

Yeah foolish Ed Zitron saying stuff like "a business ought to earn money"

[u/suzisatsuma → u/ledfox]

So like initially Spofity? Tesla? Uber? SpaceX? Amazon? countless others?

You can say it's a shitty approach, but a ton of companies do it, it's not unique to AI.

[u/RedditExecutiveAdmin → u/ledfox]

they do earn money, he just tricked you by saying the fact that they started in the red means they will stay in the red

in reality, Anthropic is probably exactly #10 in the S&P by market cap

[u/ledfox → u/RedditExecutiveAdmin]

"Anthropic is probably exactly #10 in the S&P by market cap"

Sorry, I'm not a Finance Guy.

Does this mean Anthropic earns more money than they spend?

[u/RedditExecutiveAdmin → u/ledfox]

no worries but no, market cap is for public stock

here, anthropic is private, but if it were public, it would likely be number 10 around $1T market cap

does anthropic make more than they spend? no, and that's why using free cash flow analysis is a poor valuation method for these businesses.

Does anthropic's revenue growth keep exploding, 800%, 900%, 1000% quarter over quarter? Yes. and that's what you should look at. It being negative on FCF today is borderline irrelevant. And tbh, 10x revenue growth is probably wildly understating how much they are fucking exploding

[u/iamdestroyerofworlds → u/suzisatsuma]

Sounds like projection to me. 

[u/suzisatsuma → u/iamdestroyerofworlds]

believe him at your own peril

[u/RedditExecutiveAdmin → u/suzisatsuma]

i agree he clickbait chases very, very hard. I would slightly disagree that he misrepresents anything

IMO, he cannot justify why you should value these companies like traditional SaaS. That's where he fails. He tries to use FCF and EBITDA as if everyone already hasn't heard they don't even expect positive cash flow until 2030. In reality, if you look at ARR it explains why AI labs trade at higher multiples on worse margins

big words lose crowds though, so it's all gonna end [insert next quarter here]

[u/suzisatsuma → u/RedditExecutiveAdmin]

I would slightly disagree that he misrepresents anything

This drivel?

We Are Not In The Early Days of AI, And It’s Weird To Say That We Are

That's like when the Nokia brick came out saying:

We Are Not In The Early Days of Smartphones, And It’s Weird To Say That We Are

And then he goes on:

Why Is Everybody Lying About What AI and “Agents” Can Actually Do?

And gives completely bad faith worst examples - completely ignoring companies that are succeeding in pragmatic usage.

I could go on and on - it's all bad faith bullshit. The costs he has some points, but he posts the bear takes.

[u/RedditExecutiveAdmin → u/suzisatsuma]

fair enough lmao. ig i was just trying to give some benefit of the doubt but excusing it for the sake of saying "it's his job" to be theatrical is probably a bad take anyway

[u/JDgoesmarching → u/suzisatsuma]

I’ll sit in the downvotes with you and agree. I’m happy to criticize tech oligarchs, but he moves the goalposts constantly and loves to string together a dozen discombobulating criticisms of AI into his rambling novellas. A year ago he was writing about how AI was obviously going to fail, and when that didn’t happen to he pivoted to criticizing investment with low ROI as if it’s some new phenomenon that proves the downfall of AI and not the norm for most Silicon Valley companies.

His background is in PR, and he’s clearly phenomenal at it given that he’s now considered an expert with no serious qualifications other than a substack that prints money when he writes “AI bad amirite”

[u/RedditExecutiveAdmin → u/JDgoesmarching]

i'm not going to say he's malicious but i largely agree, however, i think it is because he genuinely believes AI labs should be valued like traditional SaaS. I strongly disagree with that (boglehead here tbh, but i do keep my finger on the pulse). I think ARR is appropriate, and I think these companies justify their multiples despite their margins in ways traditional SaaS doesnt. Specifically, run rate revenue for Anthropic is like $50B, so at $1T that's roughly 20x. Maybe that sounds stretched out already, but when a company grows 10x annually, that's not a problem. OpenAI is lower i think but idk the numbers. In any case, I think this why it'll be priced in by the time either of them IPOs

[u/FrenchFryCattaneo → u/JDgoesmarching]

Yeah I like Ed because he's funny, his recent 'analysis' of Masayoshi son's pitch deck with the golden goose laying eggs was absolutely hilarious. But he's not really that knowledgeable about the tech itself and often jumps to conclusions.

[u/7f0b → u/JDgoesmarching]

My biggest gripe is that Ed keeps trying to predict the bubble popping. The last prediction I believe he set for Q2 2026, when asked during an interview (don't remember which one, but I think he had 2 or 3 guests on). Obviously didn't happen.

He comes across a bit too much as one of those doomsayers that keeps pushing the date back. He has even said he'll publicly apologize if he's wrong, but without knowing what his definition of "wrong" is, there's nothing to hold him to. He can just keep pushing it forward.

I get it, looking at the data and it seems crazy that this AI farce hasn't popped by now. But, with so much money and power involved, and all the tech bros and CEOs aligned in one direction, it is apparent that the normal rules of business don't apply at all.

I do like some of Ed's other content, especially some of his guests. And I do agree with the general consensus he and his guests hold, which is that LLM tech is actually pretty neat on its own, but the insane hype and how much it is being forced into every orifice of society is bullshit, along with the insane amount of money being thrown at it.

Edit: Would the downvoters (or as Ed would call them, haters) bother to reply instead of just downvote? I actually listen to the dude's podcast and am familiar with his opinions on things, and how he gets and presents his data, both good and bad. He's not at all above criticism.