(Preview) OpenAI Astride the World, Infrastructure Buildouts and Boundless Ambitions, More on Sora and Creation

Thoughts on OpenAI after a month of infrastructure and partnership announcements, including the differences between OpenAI and a Mag7 company, Ben’s interview with Sam Altman this week, Apps in ChatGPT, and drawing on Windows, Apple, and WeChat to better understand the company’s strategy. At the end: Questions on Sora, the 90-9-1 law, and OpenAI’s approach to copyright, as well as some brief reactions to China's move to escalate curbs on rare earth exports.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Andrew Sharp?

  Hello and welcome to a free preview of Sharp Tech.

• 0:08Andrew Sharp?

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, we're about eight hours out from game four of Brewers Cubs. How you doing? How you feeling right now?

• 0:24Ben Thompson?

  A little anxious. I mean, the Brewers probably should have put it away last night. Some real missed opportunities, particularly in the eighth inning. Caleb Durbin, you could have dived and scored. Fortunately, the Cubs still suck. So as the saying goes, so hopefully we'll pull it out. But yes, it would have been nice to have this rap dusted, done with. It's not great that our alleged number two pitcher, who I wanted to start game two and I guess I was wrong to want that, who was knocked out in the first inning. So yeah, we have fastball Freddie, man. Freddie Peralta is going to carry us through.

• 1:02Andrew Sharp?

  Okay, I like it. They looked great. They looked great in the first two games. I was like, wow, maybe the Brewers could actually do this. Again, you've been like in the trenches.

• 1:11Ben Thompson?

  Scrappy underdog, smallest payroll, smallest market in the major leagues, doing the best weekend.

• 1:17Andrew Sharp?

  For three or four months, you've been watching the Brewers every single day. So I hope for your sake, they can at least make it to the NLCS and then it really is Schlitz versus Glitz with the Dodgers on the other. And I don't have any faith in the Phillies' ability to win that series. So Dodgers Brewers would be pretty fantastic. But in any event, we have a lot to get to today and it's sort of been OpenAI week at Stratechery. Would you agree with that?

• 1:46Ben Thompson?

  I just was just looking at major league payrolls. The LA Dodgers are number one with a total payroll of $350 million. The Cubs, number five, $212 million. So we're already up against it.

• 2:01Andrew Sharp?

  The mom and pop Brewers.

• 2:02Ben Thompson?

  The mom and pop Brewers with $122 million, half that of the Cubs. So yeah, it's, you know, we are the underdog. We're lucky to be where we are. Everything is a gift.

• 2:15Andrew Sharp?

  Okay, well, Brewers Against the World, I'm right there with you, arm in arm. Let's go do it, let's shock the world. But, as I said, it's been OpenAI Week at Stratechery, and we're gonna begin with a note from Roshan. He says, "Ben and Andrew, I think it's time to officially expand the Mag 7 to a Mag 8 and include OpenAI. They directly compete against Google, Meta, and in the future, could compete with Netflix in content, Apple in devices, Microsoft in OS and API, Amazon Shopping and API, Nvidia and Tesla Robotics. It's also time to add Sam Altman to the pantheon of great business leaders and value compounders.

• 2:58Andrew Sharp?

  Buffett, Gates, Jobs, Bezos, Musk, Zuck, Larry and Sergey and Jensen, and now Sam." So, Ben, with that take as sort of the premise, you have written several thousand words about OpenAI this week. You've interviewed Sam Altman. It's a broad question, but how have you updated your thinking on what this company can be?

• 3:21Ben Thompson?

  Well, first off, I think Roshan needs to relax. Let's, let's save the, the adulation for, it's one thing to speak to what you're going to do, to even to sign deals to what you're going to do.

• 3:36Andrew Sharp?

  Let's let him stick the landing before we put him up there with Jobs and Gates.

• 3:40Ben Thompson?

  Right, we're glorifying founders based on funding rounds. Like, this is this, I'm like steroids, okay? Yes, there is a trillion dollar worth of infrastructure deals that, that OpenAI has signed in like the last month. Let's have that trillion dollars of deals actually be substantiated, and actually paid for, and then, you know, will be plenty of time to write the history books.

• 4:03Andrew Sharp?

  Yep.

• 4:03Ben Thompson?

  I think that probably the update is...

• 4:08Ben Thompson?

  It's really, it's a fascinating time. I was around in the dot com era. I was a teenager and then in college. And so sort of viewing from afar. I wasn't in the valley. I wasn't in the middle of it. Like where, you know, one of the interesting things about writing Chateauri is, is you feel particularly at this stage in the evolution, 12 and a half years in, you know, lots of people sort of pay attention and care what you think. There's a certain sort of weight of expectations. Or just weight of like, you, everything you do feels a little more weighty. And then you remember you're just writing a blog and no one cares and you're actually more invested in the Brewers winning. Um, but it's just interesting to feel these dynamics.

• 4:50Ben Thompson?

  Again, not from the inside. I'm not in Silicon Valley. I'm not in OpenAI, but I do feel in the ecosystem to, to a much, you know, to a very different degree than I was 25 years ago. And I've been saying all along that you know that it's really a bubble when everyone sort of gives up on it being a bubble. And that was sort of an intellectual statement, but I wonder if it's a-

• 5:16Andrew Sharp?

  When you say everyone gives up on it being a bubble, they say, no, it's not a bubble. This is all working and all rational and we're moving ahead.

• 5:23Ben Thompson?

  That's right.

• 5:24Andrew Sharp?

  To be concerned.

• 5:25Ben Thompson?

  It's different this time. Right. Exactly.

• 5:27Andrew Sharp?

  Yeah.

• 5:27Ben Thompson?

  And I'm not sure that's exactly right, based on how I feel right now. Which is, I'm feeling concerned. This is probably bubbly. And also a sense that you really have no choice but to go along with it and just see where it takes you. And I, it kind of makes me want to go back and talk to more people, particularly in the markets or in senior leadership at that time of the bubble. If they had this sense where they never lost the knowledge and reality, this was going to end badly. It's just an acceptance that that's just the way it's going to be. And-

• 6:05Andrew Sharp?

  Yeah.

• 6:06Ben Thompson?

  You're swept along with the tides of history and-

• 6:10Ben Thompson?

  This is a broad, roundabout way to get to answer your question. But to take a specific example, I've been critical of OpenAI and their API. I'm like, you always don't have enough compute. You, I, I think an issue with the ChatGPT five launch is you really sort of nerfed the plus level of subscribers, or at least you made them feel like they were nerfed. You drastically reduced the number of thinking queries you had, said, go to regular ChatGPT five. It will think when it's the right time to think using this router technology. And everyone feels kind of screwed. And there were a lot of complaints about ChatGPT five that I don't think were, that I think OpenAI should have ignored. But this specific one where you have paying customers who feel like they paid for something and had it taken away from them. That's a big problem.

• 6:55Ben Thompson?

  That's one of the challenges of a pay business model. If someone's getting it for free through ads, it's like, okay, fine. We'll give you a refund of $0, like, deal with it. Like, Google could get away with that with a lot of stuff. And OpenAI, th- this is one of the challenges of a subscription model is there is an implicit sort of promise that can really blow up and resonate on social media or wherever it might be. If you don't live up to them, like, this is an example. Why are you devoting so many of your resources to this API business that Microsoft's your partner? They have the exact same API in Azure. They're good at serving enterprise. Partner with them and you can sort of do it.

• 7:32Andrew Sharp?

  And with the GPT five launch, the reason they had to limit and nerf some of the thinking queries for pro users was because they had limited resources, limited compute resources.

• 7:43Ben Thompson?

  Well, that happens just constantly, right? They're constantly short on resources and who knows what technologies they have internally that are not released publicly. They kind of are starting to get a bit of the Apple problem where I've talked about with Apple and the iPhone. There's things they can't launch because they have to be able to make it at scale. And actually, I wonder how much that's a case of the.

• 8:04Andrew Sharp?

  Eight hundred million weekly users at this point. Like, the scale is pretty astounding.

• 8:09Ben Thompson?

  So if you roll it out, it like, you just have, it's. Everything now is a step change in terms of necessary capacity. You don't just get it gradually sort of ramp it up. I mean, I, I wonder if this is the case with the air tool a little bit. I feel like we've gotten inundated with more iPhone Pro commercials than ever. Maybe it's because the Brewers are in the playoffs, so I've just really locked in on TV these days. I swear I see a freaking Apple iPhone Pro commercial every other commercial. I haven't seen a single commercial for the iPhone Air at all, which is the greatest iPhone Apple has ever released. Now, again, maybe you need to hold it in your hand to appreciate that sense. Maybe it's also the case that from Apple's perspective, the iPhone Air being a slow burn,

• 8:50Ben Thompson?

  being something that sort of starts seeping its way into consciousness is a good thing because maybe they wouldn't be able to make enough as many as it can in the Pro. Now, the inventories in the store don't support that, to be clear, but I could sort of imagine that they probably had the air idea for a while, but it took a while to feel like they could confidently ship it and serve it and, and all those things in volume. Now, that may be totally wrong, maybe it's super trivial. I think there's probably still inventory at the Apple store right now, but

• 9:18Andrew Sharp?

  Yeah.

• 9:18Ben Thompson?

  It's just to illustrate the point about ChatGPT.

• 9:21Andrew Sharp?

  But it is interesting, they're not actually pushing it all that hard.

• 9:24Ben Thompson?

  Not at all, there's no pushing.

• 9:26Andrew Sharp?

  A digression, but yeah, I, I have not seen a single air commercial. Every time I talk to you about the air, though, it feels like I'm getting an iPhone air commercial.

• 9:35Ben Thompson?

  Well, that's, but that was, well, yeah, but that was, that's why the air is amazing because that's what Apple used to get all the time, right? Any Apple customer would be raving about their products at every opportunity.

• 9:47Ben Thompson?

  I'll still love it, still in love, I love it. Even though, you know, I've had a few baseball games since then, if you've noticed the lack of cameras, that's fine, I'll survive. But if you have small kids like you, you should have a Pro, it's totally worth it. So now you should get a Pro, you should get one every year because it

• 10:02Andrew Sharp?

  There you go, I'm resting easy, battery life still off the charts with my Pro over here.

• 10:08Ben Thompson?

  Well, as another aside, I, I, as part of like, I did some, the home screen reorganization. And I've had like Twitter in my dock for ages and I stuck it in a folder. Man, I should have done this a long time ago, it's incredible.

• 10:22Andrew Sharp?

  Healthy choice.

• 10:22Ben Thompson?

  Yeah, I just like, it's so much less of a, just one tap and I'm like sucking away time on Twitter. It's, it's actually pretty amazing. So I endorse that, it was replaced by ChatGPT, um, in, ChatGPT in the dock. Anyhow.

• 10:41Ben Thompson?

  There's a rational view of this API argument for normal businesses that is correct. And I went back to Microsoft, which I think is an interesting analogy. And I, in my career of writing about Microsoft, it has always been in the context of Windows being eclipsed. Being eclipsed by the smartphone, then the necessity of Cyndi Adella demoting the importance of Windows internal to Microsoft. He actually split up the Windows team. That team actually came back together a couple of weeks ago. I haven't mentioned it in the daily updates, haven't a chance to get to it. But it's fine now because no one at Microsoft thinks Windows is the future of the company.

• 11:21Ben Thompson?

  Right? Like there was a necessary interregnum where, yeah, no, you're so historically powerful internally. We have to split you up so you can't be running a coup on the rest of the company. And now they've accomplished that. It's clear what the future is and actually it is useful to have you all together. So let's get you all sort of, sort of together there.

• 11:38Andrew Sharp?

  Terrific.

• 11:39Ben Thompson?

  That's my con- and I wrote about early with Microsoft, like I left Microsoft on June 30th. On like July 2nd, I was out with a series of three articles on how Microsoft was just screwing up. Steve Ballmer didn't know what he was doing in part because he needed to make a choice. He was, he had the context that Windows was everywhere, could do everything. That was downstream of Windows dominant platform position. They were an enterprise company. They got the consumer market for free. They were dominant horizontally, vertically, everywhere. They had the whole thing. And he was in the middle of this big push on devices, this vertical business model that didn't make any sense to me. And I'm like, no, you need to focus on services. You have to serve everyone.

• 12:23Ben Thompson?

  You have to serve iOS, you have to serve Android. Your focus has to be the cloud, et cetera, et cetera. Of course, I was completely right. Cyndi Adella completely agreed with me, followed my, no, I'm sure he knew the whole, he was in the services business. He knew what was going on. That was the trend, like the company had to make a choice.

• 12:40Andrew Sharp?

  Yeah.

• 12:41Ben Thompson?

  And. I think an error I've made is insisting OpenAI make choices. And they're not in that stage of a company. AI isn't in that stage of a technology. It is in the astronomical massive growth. And there was a time you could have made the argument in the eighties or nineties that you need to make better choices in your software development because processors aren't slow enough to do what you want. And the answer was, that's a waste of time. Processors are getting faster. Assume they'll get faster and develop accordingly. The analogy to OpenAI is, yes, you're low on capacity. You're gonna be low on capacity no matter what you do.

• 13:23Ben Thompson?

  Go for it all and trust the capacity is going to come. That gives you not just the permission, but the argument to go and make these infrastructure deals. You're painting this massive vision. And this is why OpenAI is not a Mag 7. This is the startup mentality writ large at an astronomical level. You're not selling your financial results. You're selling a dream and a vision of the future and asking people to fund it. That is where they are. It's just weird because they're so big and so impactful, which speaks to why they get the money. Because you can make the Mag 7, Mag 8 argument,

• 14:07Ben Thompson?

  but that's not how they're operating. They are operating like a startup and it's pretty thrilling to watch. And it also has that sense of this is very well gonna end up in a disaster. But whatever, we're all in. Here we go.

• 14:25Andrew Sharp?

  Well, and it's kind of dizzying to keep track of. Because watching over the past couple of years, like there was that initial phase when ChatGPT launched, took the world by storm and the immediate reaction was, oh, wow. This company is the first threat to Google in 15 years. And maybe they're gonna be competing with Google a couple of years down the line. But then over the last two and a half years.

• 14:51Ben Thompson?

  What if it could be with everyone?

• 14:53Andrew Sharp?

  It's like, yeah, exactly. We see the ambitions broaden every three to four months in various ways. And now I'm not even sure how to contextualize OpenAI in the context of like big tech companies, because they're sort of trying to do everything. They're doing hardware, they're competing with Google, they're competing with Meta, they're doing entertainment, like all of it. And now they're, they've also integrated apps into ChatGPT and it's sort of like its own little OS layer. Like, all of it is pretty insane to watch. And I wonder whether they're trying to do too much and should be more focused, but it sounds like for right now, just let it breathe.

• 15:32Ben Thompson?

  This is what I mean. This is me, this is me, uh, leaning into the bubble. No focus, do it all. And, but the thing is, a lot of people are characterizing all these deals as them throwing spaghetti against the wall. I don't think so. I think it's remarkably cogent and clear if you expand your aperture sufficiently to see what they're going for, which is to be, yeah, the agentic AI layer for literally everything. That's why I called it the window, and maybe that was understating it was the windows, uh, of everything. You put on here in this rundown, the WeChat, and that's probably actually a better analogy to some respects,

• 16:10Ben Thompson?

  where we talk about with WeChat in China, it, like, WeChat diminishes the iPhone power because it's such a dominant app and it has all the mini apps in it and all the, the way you interact with everyone, the way you pay, the way you interact with government services, it's all in this one super app. And that's an, yeah, that is also a good analogy and it captures the sitting on top of everything else aspect. I'm actually kind of annoyed I didn't include that in my article. I think Windows is a better reference point for people in the US, but there's aspects of the WeChat analogy being more applicable. And, yeah, go for it. Why not? I've, I've given up. Like, like, go all in. Like, even in the back of my head, I'm like, this is gonna end badly. You should probably focus, do X, Y, Z.

• 16:55Ben Thompson?

  It's like, nope, this is the, the, the stage of evolution here is go, and I think for the fundraising and all this money and all this infrastructure commitments, there's a bit where...

• 17:09Ben Thompson?

  You make everyone dependent and invested in your success. That people like have no choice but to invest and they're like, yeah. Where else am I going to put my money? Guess I have to get it.

• 17:21Andrew Sharp?

  Everybody's rolling in the same direction here.

• 17:23Ben Thompson?

  Yep, and.

• 17:24Andrew Sharp?

  Even if they're going over a waterfall.

• 17:25Ben Thompson?

  It's like, it's like they're making selves themselves the table where the chips all go in. And, and like, and they're also, I think there's an aspect of the aggressiveness here. Might have the potential of sort of starving out competition to a certain extent. Where every marginal dollar of investment, would you rather put in OpenAI? Would you rather put in Anthropic? Would you rather put in OpenAI? Or would you rather sort of invest in Meta or whatever it might be? Would you rather put it in, in, in OpenAI? Or would you rather put it in Nvidia? Which is where the real sort of value chain battle, I think is, uh, there's a lot happening there. And Sam Altman's very good, I think, at game theory.

• 18:08Ben Thompson?

  He's very good at sketching out how this stuff sort of all links and ties together. And he's willing to risk it all.

• 18:16Andrew Sharp?

  Yeah.

• 18:16Ben Thompson?

  And that's exactly what's happening.

• 18:19Andrew Sharp?

  I mean, you talked to Sam Altman this week, as I said, for your interview. You only talked to him for about 40 minutes. You covered a ton of ground in that interview.

• 18:28Ben Thompson?

  Well, I, I, this is the third time I've talked to him. Second time I've talked to him just one on one. I've learned my lesson, usually for like an hour interview, I need to prepare 20 questions or so. It's probably good and I won't get to all of them. Uh, with Sam, I had 30 minutes, so I knew to prepare about 40 questions. And we, we actually got an extra 10. And I went through all the questions, I'm pretty sure, so.

• 18:50Andrew Sharp?

  Well, it was very solid and there are a lot of different threads that you guys discussed that I wanted to follow up on here. So I got to read some quotes from Sam and you could just riff and take it any direction you want. He said, one, on the infrastructure build out, he said, "When we are done with this new set of deals and get to explain, here's where we're going and why. I think it will all make sense. People may say it's too ambitious, it's too risky, whatever. But at least why we're doing the stack that we're doing." I think will make sense. So as far as the stack of investments.

• 19:23Ben Thompson?

  I mean, I'm confused what else he's gonna announce. I thought that his interview, what I wrote this week, I think was pretty clear. Like, again, I think all these investments are very cogent. They are looking to be the AI for everyone. Whether in a business context, a home context, you're going to have your chat GPT. That chat GPT is going to continually gain contextual knowledge about you, what you're interested in. You can do these connectors. Like, will you get your email in there, your calendar in there? But but this is the worst it's going to be, as we say again and again. You're going to have this companion. It's be total lock in because it knows so much about you that no one else does. You're gonna use it everywhere. It's like, right now, if we, you know, if you have eight billion people in the world.

• 20:06Ben Thompson?

  OpenAI's goal is to have eight billion personal assistants that are on their platform. And that you interact with and use basically 24/7. The AI is gonna monitor your sleep and give you feedback about it. Like, it's, that's what they're building. It's an omnipresent, everywhere, with you, on every device, every platform. Wherever it might be, they're going to sit on top and you're going to pull them with you everywhere. That is what gives them the leverage in the market. And to do that, to achieve that, is going to require astronomical amounts of.

• 20:41Andrew Sharp?

  Amounts of.

• 20:41Ben Thompson?

  Yeah.

• 20:42Andrew Sharp?

  Infrastructure. And so, but what's interesting, I mean, the most entertaining sequence was the investment from Nvidia. Into OpenAI, a hundred billion dollars was committed by Jensen Huang. And then, two weeks later, they turn around and on Monday, announce the deal with AMD, Nvidia's direct competitor. And that led to a 40% jump in AMD's stock, all part of the frothy atmosphere that we all inhabit right now. But in terms of what they're trying to do.

• 21:13Ben Thompson?

  Did you see what Jensen Huang had to say about this on CNBC the other day?

• 21:17Andrew Sharp?

  No, what did he say?

• 21:18Ben Thompson?

  Oh, he's like, you know, I'm really surprised. The AMD was so excited about their next chip. It seems surprising they'd give away 10% of their company for someone to buy. But hey, it's very clever.

• 21:31Andrew Sharp?

  Great. Great passive aggressiveness there.

• 21:35Ben Thompson?

  I did get the impression of Altman that Nvidia did not know about this deal before it happened.

• 21:40Andrew Sharp?

  Well, strategically there, they're trying to lock in their pricing power or OpenAI's leverage.

• 21:46Ben Thompson?

  Okay, so you have, you have, you have like the value chain.

• 21:49Andrew Sharp?

  Relying on Nvidia.

• 21:50Ben Thompson?

  Right, well, you have, you have a value chain in anything. And the most profits, there's, I wrote an article ages ago, the law of conservation of attractive profits in the context of Netflix. That phrase, law of conservation of attractive profits, is a Clayton Christensen phrase. It's basically the idea that in a value chain, you have different suppliers, you have, you have like, say, 10 companies of value chain. Usually, one company comes to dominate that value chain by virtue of, they basically become like the bottleneck in the chain. They have the key sort of piece and everyone around them has to supply them or has to be their customer. And those people around them lose pricing power because they're dependent on this one thing that is highly differentiated and can't be competed with.

• 22:34Andrew Sharp?

  All right, and that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes, or you can also go to sharp tech.fm. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Stratechery and the Stratechery Plus bundle. Check it out, and if you've got feedback, please email us at email at sharp tech.fm.