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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:

Rani Molla7h

Lyft and Uber jump after announcing expanded robotaxi partnerships with Nvidia

Uber and Lyft both announced expanded AI and autonomous vehicle partnerships with Nvidia at the company’s GTC event, sending both ride-hailing stocks up after-hours.

Uber was recently up 3.3%, while Lyft rose 3%.

Uber said Nvidia-powered Level 4 robotaxis will launch on its platform in Los Angeles and San Francisco in 2027, with plans to scale to 28 cities globally by 2028. Meanwhile, Lyft said it will use Nvidia’s AI infrastructure to improve ride-matching, mapping, and efficiency, while also using Nvidia’s DRIVE Hyperion platform as a foundation for future autonomous fleets.

Separately, Nvidia announced expanded autonomous driving partnerships with Kia and Hyundai.

The announcements highlight Nvidia’s growing push to provide the AI hardware and software powering next-generation robotaxi networks — packaging the technology needed for self-driving cars into a platform that other companies can use to compete with Tesla.

Rani Molla9h

Tesla’s Robotaxi program has disclosed its 15th accident, Electrek reports, citing the latest filing from the National Highway Traffic Safety Administration. According to Electrek’s estimation, extrapolated from the last time Tesla disclosed mileage figures, that amounts to a crash every 57,000 miles — about 9x the rate for humans.

The latest crash involved a Model Y hitting a fixed object at 9 mph in January while the autonomous system was engaged.

Humans are very much still involved with Tesla’s so-called autonomous driving service. Despite the service announcing in January that it had started removing safety monitors from the front seats, only two unsupervised vehicles have been spotted in the last month, per Robotaxi Tracker. The entire fleet has also dwindled from around 50 vehicles to just 35. Their mileage is unavailable.

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Meta’s reported 20% layoff could bring headcount to its lowest level since 2021

Meta is rising Monday morning after Reuters reported the tech giant is planning to lay off 20% of its employees in an effort to use AI to make its workforce more efficient and offset its surging AI capex costs.

On the company’s last earnings call, CEO Mark Zuckerberg touted 30% efficiency gains for its software engineers and said some “power users” of the company’s AI coding tools saw productivity jump as high as 80% — what some saw as a veiled threat to employees who failed to use AI to boost their output.

Meta’s headcount was nearly 79,000 last quarter, having steadily risen since its layoffs during the self-described “year of efficiency” in 2023. A 20% cut would bring headcount to around 63,000 — the company’s lowest level since 2021.

Shares were recently up 2.7%.

Exclusive: Meta planning sweeping layoffs as AI costs mount

Shares were recently up 2.7%.

Rani Molla

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What we know about Tesla’s Terafab project, which Musk says is launching in a few days

Elon Musk says the goal is to produce 100 billion to 200 billion AI chips a year.

Jon Keegan15h

Report: Amid safety failures, ChatGPT’s planned “adult mode” caused concern within OpenAI, with minors misclassified as adults 12% of the time

Despite a series of alarming mental health safety failures that resulted in ChatGPT users allegedly using the product to plan suicides and murder, OpenAI decided to double down on its plan to roll out an “adult mode,” allowing the AI chatbot to produce erotic content.

That decision raised alarms within the company, warning that users could develop unhealthy emotional dependence on the chatbot and that the new age estimation feature was imperfect — and therefore likely to allow minors to access the feature — according to a new report from The Wall Street Journal. Per the report, some 12% of the time, the age estimation feature mistakenly classified minors as adults.

OpenAI’s council of mental health experts were “furious” and unanimous in their opposition to the plans to move forward with the adult mode feature after they were told about the decision in January, with concerns about creating a “sexy suicide coach.”

Earlier this month, the company said it would delay the new feature to focus on other products.

OpenAI’s Bid to Allow X-Rated Talk Is Freaking Out Its Own Advisers