Monologue: AI Hits A Wall

**Ed Zitron** (0:04)
Hello and welcome to this week's Better Offline monologue. I'm your host Ed Zitron.
It's going to be a long week after a long month after a long few years, so I'm recording this monologue a little earlier than usual, on Tuesday to be specific, which means I don't have thoughts on Nvidia's earnings and won't have them unless of course things go really haywire. Now I've said that, that sounds possible, but I think it's likely the no IT loads refused cash dump will continue at least for another quarter there. In any case, we have a far more pressing problem. The deterioration of OpenAI and the AI industry hitting a wall. Last week, OpenAI completed the $7 billion employee share sale, but unlike most employee share sales, OpenAI used its own cash to buy its employees stock at the previously raised valuation of $865 billion. A few days later, both chief operating officer and former CFO Brad Lightcap and chief revenue officer Denise Dresser left the company.
Dresser had been at the company less than a year, and likely walked away from tens of millions of dollars worth of unvested OpenAI shares. In April, she said that she had, and I quote CNBC, never seen this level of conviction spread so quickly and consistently within the enterprise industry, though it appears that said conviction didn't spread far enough to keep her at a company that definitely plans to go public sometime in 2027 Unless, of course, it's not quite so definite anymore. Anthropic has dramatically accelerated its plans to go public, with Bloomberg reporting that it is aiming for a September-October listing, though we're yet to see any reporting on its actual S1. Now, this is a problem for OpenAI in many ways, but let's get through all the news first. At the very end of last week, Bloomberg also reported that OpenAI was on track to hit $40 billion in annualized revenue, $7 billion in annualized run rate less than Anthropic had claimed it hit in May. And yes, you heard that right. I said on track, which does not mean it hit the number, and no, it did not define run rate, because Bloomberg neglected to do so either. And well, who needs definitions when you're just talking about bullshit, right?
It could mean the last four weeks multiplied by 12 or 13 or really anything. We truly don't know. Everyone seems to use a goddamn different definition of run rate. Anyway, then on Monday, Bloomberg reported that Anthropic had hit $65 billion in annualized run rate, which had defined, I shit you not, as a metric that projects full year revenue from a shorter period with no further explanation.
Who fucking cares, right? It's only about what's ostensibly meant to be the largest AI company in the world with $300 billion worth of commitments. No need to actually know what you're talking about. No need to say anything further about a market moving number. No need to do that. Why fucking bother, right? Just put the story in the bag, the hype in the bag. Check, please. We wouldn't really say that at a grocery store. Anyway, in other words, OpenAI had taken four months to not quite catch up with Anthropic, only for Anthropic to quickly drop that the race wasn't even close. Regardless, AI boosters immediately got a little anxious because many had been convinced by anonymous sources and questionable data blocks like Yippit that annualized run rates were somewhere between 70 billion and 100 billion. I guess the voices in their heads weren't reliable. Did they try sacrificing an animal? I don't know what these fucking people do. It isn't read, it's just listening to the voices that say, sir, yes, 100 billion annualized by end of year. Only the worthy will be able to invest in this IPO, yes. Anyway, said anxiety is spread across the AI industry, with even the most mold-poisoned boosters now fretting both Anthropic and OpenAI's revenues had slowed down, mostly because they have. I'll also add that these numbers, which come from the end of July, are still from the era of token maxing, where companies were encouraging employees to burn as many tokens as possible with no regard for the costs, meaning that growth will invariably slow from here as enterprises cap spending as Walmart and Stripe and multiple others have done.
A day after Anthropic crapped in its coffee, OpenAI made the incredible decision to, and I quote, pause some frontier reinforcement learning training to ensure it can meet the appropriate alignment. A complex way of saying that OpenAI will stop training its latest models for at least the next few weeks to increase safety, connected to the recent incident where an OpenAI model in an incorrectly configured server was able to hack Hugging Face, which is less of a case of it going rogue and more of a case of OpenAI being bad at its job. If you tell software to do something, it's going to try and do it. Oh, it isn't lined right. You programmed the software poorly. You're wrong here. This isn't the magic of AI. This is the tragic of OpenAI. It's unclear what OpenAI hope to achieve here rather than vaguely saying, we care about safety. But from everything I'm seeing on social media and in my inbox, everybody's interpreting this as OpenAI has stopped training new models, which is also the truth, albeit only they claim for two weeks. Maybe if you believe them.