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Just over three years ago, OpenAI opened the floodgates with the launch of ChatGPT. The frantic industry-wide race that followed has resulted in soaring valuations for AI companies, tens of billions of dollars invested in data center infrastructure \u2014 and plenty of skepticism as well.<\/p>\n
For one, experts have pointed out<\/a> that OpenAI\u2019s business fundamentals are inherently different from those of its competitors like Google. These legacy businesses can tap existing revenue sources to bankroll their major AI capital expenditures.<\/p>\n The Sam Altman-led OpenAI, however, has raised record amounts of cash and has vowed to spend well over $1 trillion<\/a>\u00a0before the end of the decade without the advantage of an existing business that generates ongoing revenue. (The company\u2019s recent announcement<\/a> that it\u2019s stuffing ads into ChatGPT is likely a bid to shift that reality.)<\/p>\n The gap between the AI industry\u2019s promises of a human-level AI-driven future and reality, in other words, has never been wider much like the enormous gulf<\/a> between AI company valuations and their lagging revenues.<\/p>\n To many onlookers, that kind of hubris could end in disaster. As former Fidelity manager George Noble, who has spent decades in asset management, notes in a lengthy tweet<\/a>, the company may already be \u201cFALLING APART IN REAL TIME.\u201d<\/p>\n \u201cI\u2019ve watched companies implode for decades,\u201d he wrote. \u201cThis one has all the warning signs.\u201d<\/p>\n Besides stalling subscriber growth<\/a>, Noble pointed out that OpenAI is reportedly losing a staggering $12 billion<\/a> per quarter, as well as \u201cburning $15 million per day on [text-to-video generator app] Sora alone.\u201d Noble also cast doubt on the AI industry\u2019s promises of scaling up operations to meet demand, an immensely costly enterprise that\u2019s bound to become even more expensive as AI models demand even more power.<\/p>\n Whether their utility will increase at the same rate remains a major point of contention, with some warning<\/a> that we may have hit a point of diminishing returns in which each new iteration of the same AI model provides smaller and smaller benefits.<\/p>\n \u201cHere\u2019s the big math problem nobody wants to discuss,\u201d Noble said. \u201cIt\u2019s going to cost 5x the energy and money to make these models 2x better.\u201d<\/p>\n \u201cThe low-hanging fruit is gone,\u201d he added. \u201cEvery incremental improvement now requires exponentially more compute, more data centers, more power.\u201d<\/p>\n As a result, the former asset management boss predicted that the \u201cAI hype cycle is peaking\u201d and that \u201cdiminishing returns are becoming impossible to hide\u201d while \u201ccompetitors are catching up.\u201d<\/p>\n Noble advised investors to stay away from OpenAI, arguing that \u201cI\u2019m not touching OpenAI-adjacent plays at these valuations\u201d since the \u201crisk profile is astronomical.\u201d<\/p>\n In a separate tweet<\/a>, Noble compared Altman losing his cool<\/a> during a podcast appearance last year when asked about the company\u2019s eyebrow-raising financials to Enron\u2019s former CEO Jeffrey Skilling, who called an analyst an \u201casshole\u201d during a now-infamous 2021 conference call<\/a> after being questioned about not releasing a balance sheet. Skilling was at the epicenter of the Enron scandal and was eventually found guilty of conspiracy, insider trading, and securities fraud following the company\u2019s collapse.<\/p>\n Noble\u2019s comments come a week after Sebastian Mallaby, senior fellow at the nonpartisan think tank Council on Foreign Relations, predicted in an essay for the\u00a0New York Times<\/a> that OpenAI could run out of money within the \u201cnext 18 months.\u201d<\/p>\n Chris Jung\/NurPhoto via Getty Images<\/p>\n \u201cOpenAI failure wouldn\u2019t be an indictment of AI It would be merely the end of the most hype-driven builder of it,\u201d he wrote.<\/p>\n Noble, on the other hand, has clearly taken a far more bearish position, arguing that Altman declaring a \u201ccode red\u201d late last year was a blinking warning sign of a tough road ahead. As the\u00a0Wall Street Journal\u00a0reported<\/a> at the time, the CEO urged staffers to focus on improving ChatGPT, even at the cost of delaying other projects, as Google continued to play a successful game of catch-up.<\/p>\n And Noble isn\u2019t holding back.<\/p>\n \u201cI can\u2019t state it more clearly,\u201d he tweeted in a follow-up<\/a>. \u201cJUST SAY NO TO SCAM ALTMAN.\u201d<\/p>\n \u201cOpenAI is a cash incinerator,\u201d he added. \u201cThe product is losses for investors.\u201d<\/p>\n