Ejaaz: A lot of people have written off OpenAI, but they might finally be turning things back around.
Ejaaz: They just raised $122 billion, the largest ever private funding round.
Ejaaz: They purchased TBPN for $200 million plus.
Ejaaz: They cut out Sora. They're reconsolidating every single resource into one singular super app.
Ejaaz: But there's tension amongst the rankings. Their CFO, Sarah Fryer,
Ejaaz: is reportedly being frozen out ahead of a large IPO.
Ejaaz: Their CMO just stepped down. And there's a lot of tension around whether OpenAI
Ejaaz: will regain the throne from Anthropic.
Ejaaz: And that's what we're going to be digging into in today's episode.
Ejaaz: We think that OpenAI is undergoing a pivot that a lot of people are currently missing.
Josh: This is the comeback story. And I think it's told in three parts, right?
Josh: It's like we start with, we have this graveyard of things that have gone wrong
Josh: that led people to believe that open AI is just kind of getting left behind
Josh: by Anthropic and market shares reflected this.
Josh: But then we have all the things that are actually going on behind the scenes,
Josh: followed by this conclusion, their magnum opus, which is leading into the IPO
Josh: and all of the things they're doing behind the scenes that maybe you're not
Josh: privy to or recognizing.
Josh: And starting with Stargate, which may be the biggest failure.
Josh: I mean, the headline number was $500 billion for a data center.
Josh: And if you remember, Sam was at the White House with Masayoshi from SoftBank
Josh: and a few other people announcing half a trillion dollars for these data centers to exist.
Josh: OpenAI has since scrapped the 600 megawatt Abilene extension because it actually
Josh: would have installed GPUs at a site where the power grid wouldn't be ready until
Josh: the next gen chips are available.
Josh: So they've been having a lot of logistical issues. There was another problem
Josh: that they had where the winter weather in Abilene, where they're building these
Josh: data centers, literally knocked the liquid cooling offline for multiple days,
Josh: straining the relationship.
Josh: They've been having a bunch of issues and the competitors are kind of coming in to sweep up the mess.
Josh: And it appears as if OpenAI is kind of shifting the strategy from building these
Josh: gigantic data centers to actually just deferring a lot of the money that they
Josh: raise into cloud infrastructure and just borrowing the compute from other people.
Josh: So this is the first sign of things that weren't going so well.
Josh: Grand ambitions signed at the White House didn't really convert into everything
Josh: that they hoped and wanted for.
Ejaaz: You could also argue that OpenAI were the singular prop for the entire GPU economy, right?
Ejaaz: They started this whole circular economy by signing all these partnerships and deals.
Ejaaz: But it wasn't just GPUs. It was also the memory supply, which is required to build the GPU.
Ejaaz: So every single layer of the picks and shovels, OpenAI was involved.
Ejaaz: They committed to purchasing, I think, around 40% of the global memory supply,
Ejaaz: and they defaulted on that in the last two weeks.
Ejaaz: So a lot of this stuff is starting to implode, and people are fearful of OpenAI
Ejaaz: success based off of that. But it's not just the infrastructure side of things.
Ejaaz: We have to talk about the competition between the other major competitive for
Ejaaz: them, which is Anthropic.
Ejaaz: And Anthropic, and they've been cooking in multiple ways, the primary one being enterprise.
Ejaaz: Now, if you looked at this chart about a year and a half ago,
Ejaaz: it would be the inverse. OpenAI had the dominance in the enterprise market share.
Ejaaz: Everyone in Fortune 500 was using ChatGPT. And at some point in the last year
Ejaaz: and a half, that flipped pretty aggressively.
Ejaaz: People became really fond of coding AI. It started becoming productive within their own business.
Ejaaz: And Anthropic took the lead. They now have a 73% market dominance on first-time
Ejaaz: enterprise usage. And it's not just enterprise usage.
Ejaaz: Anthropic has also flipped their own trend on retail.
Ejaaz: Recently, they were adding around a million users or a million signups per day.
Ejaaz: And this came after the Pentagon fallout where Anthropic stood their ground.
Ejaaz: And a lot of retail users really admired that.
Ejaaz: So there is this shuffle or mix that has happened over the last year and a half
Ejaaz: where OpenAI kind of lost that gleam, that number one throne,
Ejaaz: which Sam had held on to for the first couple of years of open AI.
Ejaaz: And there's real competition in the play now.
Josh: Well, for a while, ChatGPT was synonymous with AI for a lot of people.
Josh: It's like people thought that ChatGPT was AI. It was the entirety of AI.
Josh: And what Anthropocistan has kind of punctured a hole in that perception and
Josh: saying that, hey, actually, AI is multiple companies.
Josh: In fact, Anthropoc is another player. And a lot of people have switched over.
Josh: Now, this very much feels like, what is it? Maybe the second inning,
Josh: The first inning was dominated by Chad Shibuti. The second one now is showing some competition.
Josh: There are some more elements in this graveyard that we need to get through before
Josh: we can get to the good stuff.
Josh: Sora being the next biggest one. I mean, Sora was costing allegedly $15 million
Josh: to run per day with no revenue, and they signed a huge deal with Disney.
Josh: Now, Disney didn't know that their deal was getting cut until the rest of the
Josh: world did when Sora came out and announced that they were actually cutting the app.
Josh: Now, this concerned some people. For me, it was this very exciting thing because Sora...
Josh: I mean, it was the AI slop app, right? Like it's like TikTok, except for AI only.
Josh: It was a totally different market than what it seems like they're moving towards
Josh: now. Like we just mentioned, the enterprise market is a huge market that they're going for.
Josh: And Sora has absolutely nothing to do with that. So although Sora getting closed
Josh: down could be perceived as a positive or a negative, there is one last thing
Josh: in the graveyard that is kind of just purely a negative and it has to do with
Josh: the leadership shakeup that they're having right now.
Ejaaz: Yeah, so if we look at OpenAI's products in general, they've been losing favor,
Ejaaz: but the team is what binds the company together. So they're the people who are
Ejaaz: building the products together.
Ejaaz: Even they have been suffering a bunch of reshuffling and tension amongst the ranks.
Ejaaz: So a few things happened over the last two weeks. Number one,
Ejaaz: OpenAI's CEO of Applications, Fiji Simo. So not to be confused with Sam Altman himself.
Ejaaz: She has taken a leaf of medical absence for the next couple of weeks.
Ejaaz: There've been rumors for a while now that Fiji has been working remotely from California.
Ejaaz: And so like the fact that she's not gonna be able to have focus on this next
Ejaaz: stage of open AI, kind of suggests that maybe Sam needs to step in or they're
Ejaaz: under pressure from constrained resources to be able to pull off and execute
Ejaaz: their vision of securing AGI by the end of this year.
Ejaaz: There's also Sarah Fryer, the CFO, who is reportedly being frozen out from IPO talks.
Ejaaz: Apparently, she disagrees with Sam's valuation. Apparently, she thinks it's
Ejaaz: too extreme and Sam doesn't really like that.
Ejaaz: Then you have the CMO, Kate Rauch, also stepping down from her position.
Ejaaz: So I understand that there's a period of consolidation of power under OpenAI.
Ejaaz: I know that they called it Code Red about four months ago. So it's to be seen
Ejaaz: whether this is playing off.
Ejaaz: And I think the argument that we want to make here, Josh, on this episode is
Ejaaz: that I think the pivot is working and a lot of people are missing that.
Josh: The CFO news is really exciting. And if you stick around, we'll get into the
Josh: CFO OpenAI IPO confrontation that's currently happening because I think that's
Josh: probably the biggest part of the story.
Josh: But this is where we go behind the scenes and kind of figure out what has been
Josh: working. And I think that's the biggest part of the story. And I think that's the biggest part of the
Josh: I think a lot of people don't really, they see the headlines that Sora got killed,
Josh: but they're not exactly sure why and the reasoning of it being actually something positive.
Josh: Now, Sora compute was a lot. And as we know, because their data centers haven't
Josh: been going online as fast as they needed to, OpenAI is kind of constrained for compute right now.
Josh: They have a very limited amount and a lot of that compute has to go to serving
Josh: users like us, but a lot of it also has to go to researchers for doing research
Josh: and also training in order to train these new models.
Josh: Now by killing Sora it frees up quite a bit
Josh: of GPUs because generating video consumes a lot of
Josh: compute to possibly help them train
Josh: for this new model now this new model is codenamed Spud which
Josh: is possibly GPT 5.5 or GPT 6 and Sam Altman confirmed that pre-training actually
Josh: completed on March 24th and Greg Brockman said this is the result of two years
Josh: of research and it seems like this is their perhaps not AGI moment but this
Josh: is the really big model they've been training for for a long time.
Josh: And we've started to see the leaks coming out of what the outputs of this model can actually do.
Ejaaz: Yeah, so a lot of things have been leaked out of OpenAI over the last week.
Ejaaz: And we're not entirely sure if what you're seeing on the screen now,
Ejaaz: their new ChatGPT Image 2 model is from the new Spark model that you just referenced
Ejaaz: here, Josh, but it's pretty damn good. It's so good.
Ejaaz: Yeah, like look at some of these examples, like what you're seeing on the screen
Ejaaz: here is four different examples of four different types of medium that you can generate as an image.
Ejaaz: So in this example, you've got the human anatomy in like incredible detail here.
Ejaaz: And it's all accurate. Like you can zoom in. This is such a basic thing.
Ejaaz: But a year ago, it couldn't do this. It couldn't spell English words correctly, let alone Latin words.
Ejaaz: And it is absolutely nailing it in this example.
Ejaaz: And then the one over here, it's nailed like the entire global map.
Ejaaz: And then we have an example of like a real maybe photo of what is this Bath
Ejaaz: and Body Works, where it says, Sorry, we're closed for the evening. See you tomorrow.
Ejaaz: Now, a lot of these seem probably quite basic. We've got like a YouTube thumbnail graphic here as well.
Ejaaz: In order to get the accuracy, spelling, like, look, this is not Mr.
Ejaaz: Beast that you're seeing on your screen right here.
Ejaaz: These aren't real videos that exist at all, has been incredibly hard.
Ejaaz: But now if you were to scroll on X or any other social media platform and see
Ejaaz: these images, you might be convinced immediately that that is real when really it's not.
Josh: Yeah, whatever they're doing with this model, it seems like this is the moment
Josh: in time in which we will no longer be able to tell what's air generated and what's not.
Josh: Because if I saw any of these photos independently, I would have absolutely
Josh: no clue that they were generated by AI.
Josh: Down to the handwritten note that we're seeing on screen here,
Josh: where it actually looks really handwritten, very much like a human wrote it.
Josh: And that hasn't been the case with a lot of previous AI models.
Josh: So whatever they have done to kind of cook this image gen model in the background
Josh: has worked in a way that's very impressive and really powerful.
Josh: And it's also important to note that Anthropic has no image gen capabilities
Josh: at all. When it comes to anything outside of text.
Josh: Anthropic just doesn't exist. They're not really a multimodal model at all.
Josh: And it seems as if ChatGPT now is kind of making a move towards even the Google
Josh: side of things when competing directly with Nano Banana Pro or Nano Banana Mini,
Josh: both of which are unbelievable models.
Josh: So this is really exciting to see. And I think it's an early step into their
Josh: new strategy that they're leaning towards, which is the super app.
Josh: And the super app, I think is probably the reason why a lot of people are switching
Josh: over to Claude, because they have this unbelievable desktop and mobile app that
Josh: has everything that you want under one roof.
Josh: If you use Claude, you get access to like the anthropic models just to chat
Josh: with you get access to co-work and you get access to coding along with all of
Josh: the open claw functionality that they've recently built in like dispatch and
Josh: we covered an episode last week.
Josh: And I think that super app is a very powerful thing because the current chat
Josh: GPT open AI ecosystem, it's very spread out. if you want to use Soar,
Josh: you need to download an app, log into your account.
Josh: If you want to use Codex and write code, you have to create a whole separate entity.
Josh: You have to download a separate app. It doesn't all happen on the same application.
Josh: And it appears as if OpenAI is officially doing the super app.
Josh: And this is a really important pivot for the company.
Ejaaz: Yeah. And the part I like most about this super app is their insane turnaround for coding AI.
Ejaaz: Now I have to stress at the end
Ejaaz: of last year, it was very clear what the number one coding AI model was.
Ejaaz: It was Claude opus 4.6 from anthropic
Ejaaz: and it was number one by a country mile
Ejaaz: now open ai since then called a code red and
Ejaaz: they consolidated all their compute resources all their research talent
Ejaaz: to focus on two specific things building the best generalized llm and to upgrade
Ejaaz: their coding model why because the argument was if you have the best coding
Ejaaz: ai model you will basically win the ai race because you could use that coding
Ejaaz: model to build every other single app that you want to including the next AI
Ejaaz: models that you release.
Ejaaz: And a lot of these companies, OpenAI and Anthropic, are currently using their
Ejaaz: models to build the next model. So coding, very important.
Ejaaz: Codex right now is amazing. Now, it's not seen that way amongst the average user who is vibe coding.
Ejaaz: They still very much prefer Claude Code and Opus 4.6 because the personality
Ejaaz: feels right. It sounds intuitive, it's easy to understand.
Ejaaz: For those of you who are serious about software engineering,
Ejaaz: a lot of the feedback has since been that Codex is a much better coding agent.
Ejaaz: Now, that's not entirely true when it comes to spinning up multiple coding agents.
Ejaaz: A lot of engineers have said Codex kind of loses its ability to coordinate amongst
Ejaaz: themselves, and therefore they need to use Claude Opus 4.6.
Ejaaz: But the turnaround that OpenAI has managed to achieve has been nothing short of amazing.
Ejaaz: And I think Codex has around 2 million weekly active users, which was up from
Ejaaz: like 100,000 at the start of Yeah, so very impressive turnaround.
Josh: It's growing very quickly and it's a great product. I was building a little
Josh: website just to test things out, comparing Codex directly with Opus 4.6 and
Josh: Codex was faster, it was more effective, but Cloud was easier to use.
Josh: It was much warmer, much more friendly and the design I found was just much
Josh: better in general, the design sense.
Josh: So they're both spiky in their own ways, but Codex is an amazing product for
Josh: people who are hardcore coders and just want the absolute best tokens generated.
Josh: Now, all of this to say that OpenAI is in a pretty good place and they there's
Josh: been laying the foundation perhaps a little more quietly than they should have
Josh: on the next step forward and that next step forward really is driven by this
Josh: IPO and now the IPO has been a major point of contention because there is some
Josh: conflict in the company but before we get into the conflict
Josh: The new fundraising round is telling. EJ, this is probably the final fundraising
Josh: round they're going to have that's private.
Josh: I mean, the next one is going to be the full public offering.
Ejaaz: And it's the largest ever private round. I want to show you this graphic,
Ejaaz: Josh, just to put into context the scale of this race.
Josh: Yeah, that's outrageous.
Ejaaz: Prior to this, the company that had the single largest private round was also
Ejaaz: OpenAI in 2025, where they raised around $40 billion. dollars.
Ejaaz: This is almost 3x that at that point.
Ejaaz: It is just a gargantuan round and puts things into perspective as to,
Ejaaz: you know, people really believe that the scaling laws are intact.
Ejaaz: What they mean by that is a lot of this round is going to be used to acquire
Ejaaz: GPUs, compute, setting up energy infrastructure grids to be able to train the next model.
Ejaaz: And Greg Rockland on a recent interview last week, I believe, said the same thing.
Ejaaz: He said, if I could get my hands on all of the compute in the world,
Ejaaz: I would, because it is a direct translation into revenue for OpenAI.
Ejaaz: And they've proven that time and time again.
Ejaaz: I think Anthropoc has done the same thing. But a part of me just feel a little
Ejaaz: uncomfortable about this, Josh, because they've raised all this money, right?
Ejaaz: They've given all their investors, I think I saw Ashton Kutcher in like a leaked
Ejaaz: cap table, had made a 43X on his fund from his initial investment from OpenAI.
Ejaaz: So they're already up massively.
Ejaaz: And now they're going to do this huge IPO, which has rumored to be around $1.2
Ejaaz: trillion and above on open market.
Ejaaz: I feel like things might be getting a little bit frothy. I don't know if you
Ejaaz: have the same take here, but I know that they need the funds for scaling their
Ejaaz: AI, but I don't know if a lot of this, I don't know how much of this is just
Ejaaz: kind of PR to get the biggest IPO ever.
Josh: Well, there has been PR and it hasn't been very positive because it appears
Josh: as if Sam Altman has been fighting with the CFO of the company,
Josh: Sarah Fryer, as it relates to the IPO timing and how they're actually going to initiate it.
Josh: So from my understanding, and this is kind of what intuitively makes sense,
Josh: is Sam Altman wants to get out as soon as possible.
Josh: We know SpaceX recently just filed for their IPO. It was privately,
Josh: but it's going to happen sometime around June. They're going to come out of the gates first.
Josh: They're going to raise $75 billion at a $1.75 trillion valuation,
Josh: that's going to absorb a lot of money from the market.
Josh: There's still a lot of enthusiasm for AI companies.
Josh: OpenAI surely wants to get there first. I can't imagine a world in which you
Josh: wouldn't want to be ahead of
Josh: Anthropic when the resource that matters the most to scaling is capital.
Josh: Now, Sarah Fryer is kind of, E.J.
Josh: To your point that you were mentioning earlier, she's a little bit more cautiously
Josh: optimistic where she's like, hey guys, we have a lot of money.
Josh: We just raised a ton of money.
Josh: Our problem isn't actually raising money, it's deploying it effectively.
Josh: And we haven't proven that we can deploy this capital effectively.
Josh: So why are we going to rush to raise so much more?
Josh: And I think that's a totally valid argument. And I understand the case for both. One is very pragmatic.
Josh: One is very CEO optimistic.
Josh: We are going to raise a ton of money and we are going to deploy it effectively
Josh: and bring 10 gigawatts of compute on by the end of
Josh: Is right, but it appears as if Sam is going to win. And having more capital
Josh: on the balance sheet, maybe it's not a bad thing.
Josh: In the case that things are frothy, in the case that capital does start to disappear,
Josh: they want to have at least some amount of runway to continue to scale these data centers.
Josh: And that's what this IPO would afford them. So we'll see.
Josh: But all of this is kind of guiding towards a gigantic IPO at some point this
Josh: year for OpenAI, possibly ahead of Anthropic.
Ejaaz: So what do we have as major IPOs this year? We have Anthropic that you mentioned.
Ejaaz: I I think they're rumored to go IPO at around $800 billion.
Ejaaz: So they don't quite hit the trillion dollar mark. And then you have SpaceX,
Ejaaz: which last week Bloomberg reported that they're apparently valuing it at a $2 trillion IPO.
Ejaaz: So OpenA, I think wants to- You think it's too high? 1.75, 1.75.
Ejaaz: Okay, so you're fine with $250 billion discount. Got it, okay,
Ejaaz: right. Okay, okay. But the point is, I think Sam wants to kind of.
Ejaaz: Mark the ground, plant the flag that OpenAI is a serious company and that they
Ejaaz: are capable of raising huge amounts of capital for a very necessary technology.
Ejaaz: Now, there's the optimistic take where if things are going well,
Ejaaz: you kind of want to add fuel to the fire.
Ejaaz: But also, if things go horribly wrong, it's kind of nice to have $122 billion
Ejaaz: in the back, I guess, to kind of bail yourself out. So I see the angle that they're going for.
Ejaaz: Again, to my earlier point, apparently this is their leaked cap table that I'm
Ejaaz: showing you on screen, which shows how much original investors in OpenAI are up,
Ejaaz: including recent ones, by the way, such as SoftBank, who wrote a 64 or 65 billion
Ejaaz: dollar check and is already up one and a half times.
Ejaaz: The only one that's actually down, ironically, is NVIDIA, the richest company
Ejaaz: in the world, who is underwater by 500 million dollars because they recently
Ejaaz: invested 30 billion dollars into the 122 billion dollar round.
Ejaaz: So a A lot of people are up. Ashton Kutcher, again, greatest investor of all time, is up around 43x.
Ejaaz: The point is there's a lot of money here.
Ejaaz: Evaluations are hugely inflated. OpenAI cannot afford not to deliver at this
Ejaaz: point because if they do, I fear it would lead to the implosion of a lot of
Ejaaz: capital markets, not just AI.
Josh: Yeah, but if they do, if this new model codenamed SPUD does land sometime in
Josh: April or May, and it performs as advertised, as this pseudo-artificial general
Josh: intelligence, then every single open AI is dead narrative kind of reverses overnight.
Josh: Yes. And then the GPT exodus becomes a thing of the past. And the bet that Sam
Josh: is making is that he's going to
Josh: be able to create the most consequential product probably since GPT 4.0.
Josh: Yep. And if they could do that, if they could pull that off,
Josh: and if they could do so leading up to their IPO, then that's a very strong headwind
Josh: that they can have leading into this giant fundraising round,
Josh: hopefully giving them a ton of money on the cap table, but also raising quite a large valuation.
Josh: So there's a lot of things at play here. There's a lot of strategy being deployed
Josh: and great products being built.
Josh: And I think over the next coming weeks and months, we're going to see the fruits
Josh: of their labor kind of come to life. And I'm hopeful that they are a grand slam,
Josh: home run, incredible products.
Josh: And I'm pretty stoked for the future of OpenAI.
Ejaaz: Well, what if I told you Sam had written a industrial policy on post-AGI economics,
Ejaaz: aka universal high income, where he dropped this this morning.
Ejaaz: And he basically describes a world where AGI basically does and automates all human labor.
Ejaaz: And so we need to figure out a way to give dividends to humanity.
Ejaaz: So he talks about restructuring the entire tax system, giving people a salary
Ejaaz: every couple of weeks or every month, and humans just get a four-day work week,
Ejaaz: which sounds amazing probably to a lot of listeners.
Ejaaz: So I'm just saying he wouldn't probably be writing this manifesto if part of
Ejaaz: what he's claiming to deliver on is real.
Josh: Yeah. So bullish on OpenAI as a company, bullish on the roadmap,
Josh: bullish on the kind of foundational work they've been doing the last few months,
Josh: and just very excited to see where they end up.
Josh: I think a lot of people who are doubting them, who are canceling their premium
Josh: subscriptions, are going to find themselves sadly mistaken over the next coming
Josh: weeks and months, particularly starting with this new image model,
Josh: which seems pretty incredible.
Josh: And I imagine once it's fully released, and it's not just in its leaked form,
Josh: we're going to be getting some really amazing demos.
Josh: We'll be offering them up here on the show as always and as always thank you
Josh: guys so much for joining us and for watching this episode we're kicking off
Josh: another strong week in the world of ai if you enjoyed this please don't forget
Josh: to share with your friends your family anyone who you think would be interested
Josh: in this type of content and each has any final words before we take off for the day nope
Ejaaz: Thank you guys so much for listening and we'll see you on the next one.