Editor’s note: This article has been updated to correct the spelling of Mark Cuban’s name.
OpenAI's business strategy doesn’t impress billionaire Mark Cuban.
"They're [throwing] away the money at scale,” Cuban said.
In an appearance on the Big Technology Podcast, the former “Shark Tank” star criticized OpenAI's fundraising efforts. He compared the ChatGPT maker to Apple, stating that they have "spent next to nothing" and yet they have built a foundation where you can just "plug and play into their devices."
The entrepreneur added that he is skeptical of the large spending projections for data centers. He argued that computing power is advancing so quickly, becoming faster and cheaper, that many of today's eye-catching investment projections are unlikely to materialize.
The numbers thrown out there "aren't going to come to fruition,” Cuban said. “It's not going to happen."
Those who have gone all in on AI are “spending more cash than they have available,” Cuban said. Whether large AI models (like those behind ChatGPT or Gemini) will be profitable remains to be seen, he adds.
Specifically, he questioned whether the industry will end up like streaming, with a few winners and many struggling, or if it will consolidate into one dominant company.
OpenAI, which is reportedly preparing for a public listing, boasts a $852 billion valuation. But it has reportedly failed to meet its revenue and new-user targets. As a result, observers wonder whether it can sustain high data center costs.
The Sam Altman-led company's failure to meet its targets has raised concerns among company leaders. The company's CFO, Sarah Friar, has expressed worries about the company's ability to afford computing contracts in the future if revenue growth stalls, according to the Wall Street Journal.
OpenAI also missed its targets for one billion weekly ChatGPT users and annual revenue, largely due to strong competition from Alphabet's (NASDAQ:GOOGL)(NASDAQ:GOOG) Google Gemini.
Executives are prioritizing cost control and discipline, sometimes clashing with the CEO, while the company faces high subscriber churn, according to WSJ.
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