Sam Altman, cofounder and CEO of OpenAI (Stefano Guidi/Getty Images)

Weird Money

OpenAI is in the business of making OpenAI employees rich

OpenAI's stock compensation expense showed that its employees were paid between $400,000 and $2,000,000 in average stock comp through the first six months of 2024.

Jack Raines

10/10/24 2:53PM

Since OpenAI closed its massive $6.6 billion funding round that valued the company at $157 billion, I’ve been wondering how they managed to convince investors that the valuation makes sense. The answer, it turns out, was another large number: $100 billion.

Cory Weinberg over at The Information published an interesting piece breaking down OpenAI’s investor pitch for its most recent fundraise, and some of the numbers they showed investors were astounding. Notably:

Revenue: OpenAI expects revenue to scale from an expected ~$4 billion in 2024 to $100 billion in 2029, which would be a ~90% revenue CAGR over the next five years. While revenue growth over the last year has been explosive (monthly revenue for August 2024 was $300 million, up 1700% since early 2023), growth will become more difficult with size. For example, it’s easier to go from ~$180,000 in monthly revenue to $300 million (as OpenAI did) than it would be to grow from $300 million to $510 billion.

Compute Costs: Ignoring all other operating costs such as salaries, general and administrative expenses, and sales and marketing, OpenAI’s compute costs to train and run its models are expected to be $5 billion this year, compared to $4 billion in total revenue.

Stock Compensation: OpenAI reported stock compensation of $1.5 billion in the first half of 2024, which is around its revenue for that period.

This last point is especially interesting. Two weeks ago, I discussed the curious case of OpenAI’s wave of resignations, as at least nine high-level executives had left the company over the last year. At the time, I pointed out one factor that could be influencing these resignations was that long-time OpenAI employees had the opportunity to sell equity in a tender offer for massive returns:

All of the above-mentioned employees have been at OpenAI since at least 2022, when OpenAI was valued at ~$20 billion, and most of them started even earlier, when OpenAI’s valuation was much lower. In February 2024, they were able to sell some of their stakes in a tender offer at an $86 billion valuation. If you were a long-tenured employee at OpenAI, and you took some chips off the table in that tender offer, you’re rich. And not only are you rich, you are a hot commodity in a hot labor market in the hottest sector in technology right now. You would have no problem raising capital for a new startup or getting paid top-dollar to join another AI startup or a big tech company.
The real question is, if you’re already rich, anyone would hire or fund you, and the company you’ve worked at for years has changed its entire mission statement… why would you stay?

The stock-based compensation stat all but confirms that, yes, OpenAI’s employees have been getting p-a-i-d. For context, Nvidia, a $3.3 trillion company with ~30,000 employees, paid $2.2 billion in stock compensation through the first half of 2024. OpenAI, which is worth roughly 5% of Nvidia, paid 68% of Nvidia’s stock compensation. And the compensation per employee is jealousy-inducing.

In November 2023, OpenAI had 770 employees. According to employee contact database RocketReach, OpenAI now has 3,726 employees. With $1.5 billion in stock compensation paid out in the first half of 2024, the average employee earned between $400,000 and $2,000,000 in stock-based compensation in that six-month period, depending on headcount over the course of that period. Additionally, OpenAI’s CFO confirmed that, as with the February tender offer, employees would again be able to sell shares after this funding round. So, no, we shouldn’t be surprised that OpenAI employees are resigning. They’re millionaires with willing buyers of their shares.

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Rani Molla10h

Apple stock takes a hit on report it’s pushing back AI Siri features — again

Apple customers may have to wait even longer for the company’s long-awaited AI Siri, Bloomberg reports.

The iPhone maker had been planning to include a number of upgrades to Siri in a March operating system update, but the company now is planning to spread those out over future versions. That means some features first announced in June 2024 — an AI Siri that can tap into personal data and on-screen content — might not arrive until September with iOS 27.

The postponements happened after “testing uncovered fresh problems with the software,” Bloomberg said, including instances where Siri didn’t properly process queries or took too long to respond.

The stock, which had been trading up more than 2% today, has pared some of those gains on the news.

For what it’s worth, Apple’s iPhone sales — a record last quarter — don’t appear to be suffering for lack of AI.

Apple’s Latest Attempt to Launch the New Siri Runs Into Snags

The stock, which had been trading up more than 2% today, has pared some of those gains on the news.

For what it’s worth, Apple’s iPhone sales — a record last quarter — don’t appear to be suffering for lack of AI.

Rani Molla11h

Meta breaks ground on massive $10 billion AI data center — and the costs won’t stop there

Meta announced today that it broke ground on a new, giant AI data center. This one is located in Indiana, has 1 gigawatt of capacity, and will cost more than $10 billion.

In a press release, the company touted the 4,000 construction jobs and 300 operational positions Meta expects to bring to the area. It did not disclose any tax incentives tied to the project.

But much like with the company’s Hyperion data center in Louisiana — where we calculated incentives in the billions — the number of long-term jobs is likely small relative to any public subsidies the company ultimately receives.

The $10 billion build represents a notable chunk of Meta’s planned $115 billion to $135 billion in capital expenditure this year. And operating costs will add substantially to that total over time.

Earlier this year, President Trump warned tech giants to “pay their own way” when it comes to energy, as data centers have driven up electricity costs in some regions. Meta’s announcement appears to anticipate that criticism, dedicating significant space to explaining how it will mitigate the energy and water impact of the facility:

“With all our data centers, we strive to be good neighbors. We pay the full costs for energy used by our data centers and work closely with utilities to plan for our energy needs years in advance to ensure residents aren’t negatively impacted. To help support local families in need, we’re providing $1 million each year for 20 years to the Boone REMC Community Fund to provide direct assistance with energy bills, and funding emergency water utility assistance through The Caring Center. We also pay the full cost of water and wastewater service required to support our data centers. Over the course of this project, Meta will make investments of more than $120 million, toward critical water infrastructure in Lebanon, as well as other public infrastructure improvements including roads, transmission lines and utility upgrades.”

Unlike hyperscalers such as Google and Microsoft, which can offset infrastructure costs by selling cloud capacity to customers, Meta bears those expenses largely on its own. That dynamic could make the economics of AI infrastructure more challenging for the company as its AI spending continues to accelerate.

Meta’s New Data Center in Lebanon, Indiana Marks a Milestone AI Investment

The $10 billion build represents a notable chunk of Meta’s planned $115 billion to $135 billion in capital expenditure this year. And operating costs will add substantially to that total over time.

“With all our data centers, we strive to be good neighbors. We pay the full costs for energy used by our data centers and work closely with utilities to plan for our energy needs years in advance to ensure residents aren’t negatively impacted. To help support local families in need, we’re providing $1 million each year for 20 years to the Boone REMC Community Fund to provide direct assistance with energy bills, and funding emergency water utility assistance through The Caring Center. We also pay the full cost of water and wastewater service required to support our data centers. Over the course of this project, Meta will make investments of more than $120 million, toward critical water infrastructure in Lebanon, as well as other public infrastructure improvements including roads, transmission lines and utility upgrades.”

Jon Keegan14h

Humanoid robot maker Apptronik raises $520 million

Apptronik, an Austin, Texas-based robot manufacturer, said it has closed out its Series A fundraising round, raising $520 million. The fundraising is an extension of a $415 million round raised last February, and included investments from Google, Mercedes-Benz, AT&T, and John Deere. Qatar’s state investment firm, QIA, also participated in the fundraising round.

Apptronik makes Apollo, a humanoid robot targeted for warehouse and manufacturing work. The company is one of several US robotics companies that are racing to apply generative-AI breakthroughs to humanoid robots, in anticipation of a new market for robots in homes and workplaces.

Apptronik Raises $520 Million in New Funding to Build More Humanoids

ELECTRIC

AVENUE

Patrick Sisson15h

Rani Molla17h

Ives: Microsoft and Google’s giant capex plans are worth it

Don’t mind the AI sell-off, says Wedbush Securities analyst Dan Ives, who thinks fears around seemingly unfettered Big Tech capex budgets are unfounded, especially in the case of Microsoft and Google. Together, the two hyperscalers are slated to spend around $300 billion on the purchases of property and equipment this year as they double down on AI infrastructure, but he says both have already shown that they can turn the spending into revenue and growth.

“They are reshaping cloud economics around AI-first workloads that carry higher switching costs, deeper customer lock-in, and longer contract durations than before,” Ives wrote, adding that these giant costs will be spread out over time and set the companies up for success in the long run. Per Ives:

“While near-term free cash flow optics remain noisy, the platforms that invest early and at scale are best positioned to capture durable share, pricing power, and ecosystem control as AI workloads mature. Over time, we expect utilization leverage to turn today’s elevated investment into a meaningful driver of long-term value creation.”

How the Big Tech companies are spending their huge capex budgets

“While near-term free cash flow optics remain noisy, the platforms that invest early and at scale are best positioned to capture durable share, pricing power, and ecosystem control as AI workloads mature. Over time, we expect utilization leverage to turn today’s elevated investment into a meaningful driver of long-term value creation.”

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