Hannah Petrovic

So you can get a sense of after this initial phase of rapid growth, where the industry and the company will land at.

Now, if you did that, then I have just said like, okay, they look to have made like a decent gross margin.

But there is one more wrinkle that you need to account for here, Matt, which is that these products are really, really expensive to develop and they have a very short shelf life.

So it's not enough to just look at the gross profit and check like, okay, it seems that they have this 50% gross profit.

It seems they're getting twice as much money as you put into the machine.

Like, no, you actually need to think about how much money does it take to develop a new model and how long would you expect that model to stay relevant before it becomes obsolete by your competitors or by open weight alternatives that will make a dent to the usage of your model.

So this is the second part of our research.

where we tried to look at how much OpenAI is spending in R&D and how that compares to the gross profits overall.

And what we found is quite shocking.

So if you look at how much they spent in R&D in the four months before they released GPT-5, that quantity was likely larger than what they made in gross profits during the whole tenure of GPT-5 and GPT-5.2, which points to how competitive this space has become in the last couple of years.

So the cost of compute of building these models, I don't think it's quite going down.

I do see it as going up time and again.

The pre-training seems to be going up.

And despite rumors to the contrary, pre-training is not dead at all.

People are building 100 billion data centers for a reason.

They are invested in running very large-scale experiments and very large-scale training runs that are unprecedented inside.

And I think that this is part of what contributes to these models being so expensive.

Like one of the interesting things here when I think about OpenAI is the game that they're playing.

The game that they're playing is not so much about becoming profitable right away.

Rather, what they are trying to do is convince investors