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Who’s really profiting from all the money pouring into AI?

7/31/24 2:50PM

This earnings season is revealing new details of big tech’s eye-popping spending on all things AI, and it shows no signs of slowing. But who is profiting from all this investment, and will it ever lead to profitable AI businesses?

Nvidia seems to be continuing to make a killing selling its AI computing hardware to all of the companies in the space. Unless there is a huge shift away from training ever larger AI models, its products are likely to be in demand.

Microsoft is making money selling OpenAI’s technology to customers via Azure, and they are planning long-term to meet demand. On Microsoft’s Q4 earnings call this week, executives said demand for AI computing from Azure boosted revenue, and signaled that large investments in data centers, and expensive GPUs will continue, laying out a 15 year timeline to build capacity, allowing them flexibility to respond to demand for AI services.

New reporting from The Information reveals that Microsoft is on track to make about $1 billion annually reselling OpenAI’s services (as part of their complicated partnership), but currently a quarter of that revenue is coming from one customer — TikTok, which could turn elsewhere for its AI computing.

Microsoft’s deal gives them access to OpenAI’s technology, and is rumored to include a hefty slice of their OpenAI profits until their investment is recouped.

Speaking of OpenAI, the company makes money selling Plus, Team, and Enterprise tiers of ChatGPT subscriptions, and by charging developers access to its API, which is estimated to generate several billion dollars per year. But OpenAI’s business depends upon expensive hardware, high energy costs and has to bankroll some of the highest paid roles in tech.

OpenAI has been busy spending Microsoft’s $10 billion investment on a quest to build artificial general intelligence, which may not be a thing that will ever actually exist. But industry observers are starting to question the fundamentals of OpenAI’s business and can’t figure out how it will continue to raise the cash it needs to power its research and development. Not to mention its ChatGPT service, which is incredibly expensive to operate.

OpenAI’s technology will be showing up on Apple iPhones this year as part of iOS18, but Apple isn’t paying them for the deal, raising more questions about how OpenAI will fund those increased costs.

Meta has been spending massively on AI research and hoarding expensive chips, with plans to spend between $35 billion and $40 billion on capital expenditures in 2024. But its AI spending hasn’t yielded much in the way of revenues yet, other than AI improvements to its advertising business.

Earnings reports from Meta later today and Amazon tomorrow may tell more of the story. Last quarter, AI was a key driver of big tech’s capex spending spree:

Jon Keegan1h

OpenAI acquires Astral, adding talent to Codex team

OpenAI has acquired open-source Python tool developer Astral, bringing aboard additional coding talent for its Codex team.

The company said the acquisition will help Codex “expand beyond coding” by helping address a wider range of development tasks, such as planning, testing, and code maintenance.

OpenAI said Codex has seen “3x user growth and 5x usage increase” since the start of 2026, and has over 2 million weekly active users.

Software development is emerging as one of the key battlegrounds where OpenAI is competing for market share with Anthropic, which has been enjoying success with its Claude Code product.

OpenAI said it will continue to support Astral’s open-source software projects.

OpenAI to acquire Astral

OpenAI said Codex has seen “3x user growth and 5x usage increase” since the start of 2026, and has over 2 million weekly active users.

Software development is emerging as one of the key battlegrounds where OpenAI is competing for market share with Anthropic, which has been enjoying success with its Claude Code product.

OpenAI said it will continue to support Astral’s open-source software projects.

Rani Molla2h

Elon Musk gives an estimate for Tesla’s AI6 chip timeline... while the AI5 is still unfinished

Tesla CEO Elon Musk said yesterday that the company’s AI6 chip could, with “some luck and acceleration using AI,” be finalized and sent to manufacturing by December. For those paying attention, Tesla hasn’t confirmed that its previous chip, the AI5, has reached tape-out, with Musk saying only that the design is in “good shape” and “almost done.” Still, Musk is already talking about subsequent chips AI6, AI7, AI8, and beyond.

Here’s a roundup of when these chips are expected, what they’re supposed to do, and what Musk himself has said about them.

While the AI5 and AI6 will be made by TSMC and Samsung, respectively, Musk has said Tesla eventually aims to manufacture its future AI chips at Tesla’s upcoming Terafab factory in Austin.

Rani Molla4h

NHTSA expands Tesla FSD probe, focusing on whether system can detect when cameras can’t see the road

The National Highway Traffic Safety Administration said it is expanding its probe into Tesla’s Full Self-Driving system into an engineering analysis covering about 3.2 million Teslas, a majority of its vehicles that are on the road in the US, Reuters reports.

The agency is focusing on Tesla’s “degradation detection system,” which is meant to recognize when its camera-based technology cannot reliably perceive the road and prompt drivers to intervene:

“Available incident data raise concerns that Tesla’s degradation detection system, both as originally deployed and later updated, fails to detect and/or warn the driver appropriately under degraded visibility conditions such as glare and airborne obscurants. In the crashes that ODI has reviewed, the system did not detect common roadway conditions that impaired camera visibility and/or provide alerts when camera performance had deteriorated until immediately before the crash occurred.”

Tesla CEO Elon Musk has long argued that the company’s self-driving approach does not require the expensive lidar sensors used by rivals such as Waymo.

NHTSA deepens probe into Tesla's driver-assistance system

The agency is focusing on Tesla’s “degradation detection system,” which is meant to recognize when its camera-based technology cannot reliably perceive the road and prompt drivers to intervene:

“Available incident data raise concerns that Tesla’s degradation detection system, both as originally deployed and later updated, fails to detect and/or warn the driver appropriately under degraded visibility conditions such as glare and airborne obscurants. In the crashes that ODI has reviewed, the system did not detect common roadway conditions that impaired camera visibility and/or provide alerts when camera performance had deteriorated until immediately before the crash occurred.”

Tesla CEO Elon Musk has long argued that the company’s self-driving approach does not require the expensive lidar sensors used by rivals such as Waymo.

$1B

Rani Molla5h

Apple is behind the rest of Big Tech when it comes to developing its own AI, but that hasn’t stopped it from cashing in on the AI boom. The iPhone maker stands to bring in more than $1 billion in App Store fees this year from other companies’ generative-AI apps, mostly from ChatGPT, The Wall Street Journal reports, citing data from App Magic.

Unlike rivals pouring hundreds of billions into AI infrastructure, Apple’s spending has been relatively modest, with its overall capital expenditure actually declining last quarter. Its lucrative App Store model lets Apple profit from AI as a gatekeeper without fully joining the expensive race to build it.

OpenAI is shipping everything. Anthropic is perfecting one thing.

The two AI titans are in a race to grow revenues, but they have very different strategies for releasing products. And one approach appears to be winning out.

Jon Keegan21h