A lot of attention is aimed at the huge investment rounds, cash burned into training foundation models (the trillions mentioned by Sam A.) and not enough analysts explain the units of economics to understand a business.

If you wonder why investors still think it’s a good idea to part with their money, I tried to break down the economic units and long term potential how all this could make sense.

Partial TL;DR

- Cash burn is not a fair approximation for COGS. OpenAI spends mostly on R&D like a pharmaceutical company does. - ChatGPT 4o could be making more than 12.8% in gross margin. - ChatGPT OSS 120B could be making 89% gross margin. It is 90% cheaper than 4o-mini with equivalent reasoning and 3x faster inference. - ChatGPT 5's gross margin is most likely to fall between 12.8% and 89%.

Full breakdown: https://medium.com/@brenoca/openais-road-to-profitability-8c7231f8494b