David Bridges
As Donald Trump gears up for his presidency, major tech leaders are publicly aligning themselves with him. Billionaires such as Mark Zuckerberg have seen their wealth surge, while Elon Musk has emerged as an influential force in global affairs. This shift in power dynamics could spell trouble for those who have long opposed Musk, particularly Sam Altman and OpenAI. Altman’s company is facing significant challenges, potentially marking it as one of the biggest casualties of Trump’s impending second term.
Even before Trump’s election, Altman and OpenAI were already on a precarious path, set to emerge as major losers in the tech landscape of 2024. OpenAI is often likened to a money furnace that consumes both cash and electricity at an alarming rate. Its flagship product, ChatGPT, while popular among students and busy professionals, struggles to sustain a profitable user base, as the subscription fee of $20 a month limits its market. Despite OpenAI’s claims of vast user numbers, many of these individuals do not generate revenue for the company, ultimately leading to financial strain.
The majority of users accessing ChatGPT do not pay for the subscription, making them reliant on the service without contributing to its revenue. Each interaction and generated image incurs costs, leading to a projected loss of $5 billion for OpenAI this year alone. According to documents analyzed by The New York Times, the operational costs of running these AI systems could escalate to an astonishing $37.5 billion annually by 2029, raising concerns about the sustainability of the business model.
So where is OpenAI’s funding and computing power coming from? The primary source has been Microsoft, but there are emerging signs that this tech giant is losing faith in OpenAI’s direction. OpenAI operates with a unique structure: a non-profit board oversees a for-profit entity aimed at developing artificial general intelligence (AGI). The company’s former chief scientist, Ilya Sutskever, has been known to treat AGI with a fervor akin to religious devotion, engaging in bizarre rituals and public displays that raise eyebrows in the tech community.
Late last year, Microsoft grew concerned when the board, led by Sutskever, made the controversial decision to oust Altman. Although Altman made a comeback, the relationship’s damage had already been done. Over the past year, the collaboration between OpenAI and Microsoft has deteriorated, with Microsoft withholding the necessary resources and funding that OpenAI believes are essential to realize its ambitious goals.
Companies that will thrive in the AI sector bubble, which many believe is nearing its peak, are those shifting focus to enterprise solutions and substantial government contracts. For example, Meta has made its Llama models open source and is actively collaborating with tech companies, the U.S. government, and the Pentagon. Recently, Anthropic announced a partnership with Palantir and Amazon Web Services to provide advanced AI tools to the Department of Defense and U.S. intelligence agencies.
OpenAI’s competitors seem to grasp that the pursuit of AGI is a costly illusion, with most of the real profits lying in defense contracts. In a bid to secure a foothold, OpenAI has partnered with government contractor Carahsoft to facilitate the sale of ChatGPT licenses to various government entities. According to reports from Forbes, while OpenAI has not yet penetrated Pentagon contracts, it has managed to secure $108,000 in licenses for NASA and $100,000 for the Department of Agriculture. However, these figures represent mere drops in the ocean for a company projecting a need for $40 billion annually to remain operational.
The future role of Musk in the upcoming Trump administration remains uncertain. However, it is well-known that Musk has a longstanding animosity towards Altman, stemming from their contentious history. Musk claimed in a May 2023 CNBC interview, “I am the reason OpenAI exists.” Originally an investor in the company from its inception in 2015, Musk eventually severed ties due to disagreements over its direction.
Since his departure, Musk has sought to legally challenge OpenAI, accusing it of straying from its foundational mission to develop AGI safely. His lawsuits have specifically targeted Altman, leading OpenAI to release internal emails that illustrate Musk’s desire for control over the project, including an intention to merge OpenAI with Tesla, which was met with resistance.
As we approach the start of Trump’s second term, the dynamics have shifted, with Musk now in a favorable position with the President-elect. Meanwhile, Altman has publicly expressed his support, stating, “Congrats to President Trump. I wish for his huge success in the job.” He emphasized the importance of the U.S. maintaining its leadership in the development of AI that aligns with democratic values.
Given Musk’s rising influence, it may be prudent for Altman to show deference to him. Musk is frequently seen in high-profile photographs with Trump’s family, oversees a cutting-edge space exploration company, revolutionizes satellite communications, and owns a social media platform instrumental in the U.S. election. In stark contrast, Musk ranks at the top of Bloomberg’s list of the 500 wealthiest billionaires, while Altman does not even make the cut.
Ethan Carter
Daniel Mercer
