505: Fiber, OpenAI vs Apple, Eric Schmidt’s Secret AI Military Drones, How China Circumvents GPU Ban, What is an NPU?, and Dark Matter
"Apple has most of the leverage"
"If I need things to be a certain way, I'm held hostage by them."
—Rugby player Jonny Wilkinson, on maintaining a mindset of flexibility
🕸️ 🏎️ 🏇 My home internet is now fiber!
I had some technical difficulties for a bit, but nothing that a factory reset on the SFP module and router couldn’t fix. I’ve been sailing the seas of laser pulses ever since.
My ping is now a little less than half of what it was on cable (˜15 ms vs ˜35 ms), and I can saturate 5GHz Wi-Fi 6 in speed tests when I stand close to the router — top wifi speeds degrade with distance, so at my desk on the other side of the house I don’t get full speeds, but it’s still much better than what I had before.
To get closer to the full 1.5 gigabits/sec, I’ll have to run an ethernet cable to my office, which probably involves drilling holes in floors to the attic, and then back down into my office (ideally passing through a closet that is out of the way).
It’s crazy to think that at the full 1.5 gigabits/sec, there’s a laser pulsating tens of thousands of times per second in my garage. How do they achieve that top speed without lasers that can blink at 1.5 GHz? All kinds of clever techniques like multiplexing and pulse modulation.
I’m not sure which specific tricks are used in a home fiber setup, but Wavelength Division Multiplexing (WDM) allows multiple data streams to be transmitted simultaneously using different colors of light and Quadrature Amplitude Modulation (QAM) can encode multiple bits per symbol by modulating two carrier waves that are 90 degrees out of phase with each other.
🗣️🗣️🗣️🗣️🗣️🗣️🗣️🗣️ Big thanks to the supporters who joined the very first Liberty’s Highlights Zoom Chat on Wednesday.
We had 8 people at peak, so it was a small group, but I had a lot of fun and we covered many topics. It was great to be able to put faces and voices to many of your names that I’ve been seeing in emails for years!
I think Nick Z. was the most OG, having been on the steamboat for 3 years, but we had some 2-year tours of duty too.
About a dozen of you emailed or DMed me to say they wish they could’ve joined but weren’t able to — don’t worry, we’ll be doing more of these, and I’ll try to vary the day of the week and time so that it lines up with more time zones and schedules.
Again, thanks to all who dropped by. This was the beginning of a fun new tradition! 💚 🥃
🏦 💰 Liberty Capital 💳 💴
🤖💰 OpenAI Annualized Revenue Hits $3.4bn…
OpenAI has more than doubled its annualized revenue to $3.4 billion in the past six months or so, OpenAI CEO Sam Altman has told staff [...] Annualized revenue was $1.6 billion in late 2023
Impressive, at that scale.
How does that revenue break down?
Most of OpenAI’s revenue—about $3.2 billion on an annualized basis—comes from subscriptions to its chatbots as well as fees from letting software developers access its models through an application programming interface [API].
Microsoft has typically taken a cut from some of OpenAI's sales of AI models because those models run on Microsoft's cloud. OpenAI also receives a cut from Microsoft’s sales of OpenAI models to Microsoft's own Azure cloud customers. OpenAI's cut now amounts to about $200 million on an annualized basis, or roughly 20% of the revenue Microsoft is generating from that business, Altman told staff. (Source)
Compared to the amounts of R&D and CapEx invested by OpenAI and Microsoft, these numbers aren’t that big. The R is important, but you want to eventually look at the OIC.
It’s too early to tell if OpenAI will be able to capture much of the value they’re creating or if large models will be mostly commoditized and if players at other parts of the value chain will capture most of the value (TSMC, Nvidia, Broadcom, Apple, Google, Meta, Amazon, Microsoft, etc).
…Apple *Isn’t* Paying OpenAI 🍎🚫💰
As I speculated in Edition #504, it doesn’t look like Apple is paying OpenAI:
Neither Apple nor OpenAI are paying each other to integrate ChatGPT into the iPhone, according to a person with knowledge of the deal.
Instead, OpenAI hopes greater exposure on iPhones will help it sell a paid version of ChatGPT, which costs around $20 a month for individuals. Apple would take its 30% cut of these subscriptions as is customary for in-app purchases.
A few months ago, the narrative was that Apple was lagging and they desperately needed someone like OpenAI to help them catch up, so they would pay them for access to their cutting-edge model.
But now it looks like Apple has most of the leverage.
Have you noticed how Sam Altman didn’t even get a segment in WWDC? He was in Cupertino but they didn’t invite him on stage. Even Ubisoft had an executive that got some face time.
OpenAI *isn’t* integrated into the OS or Apple’s apps. They are in a modular spot and could be hot-swapped for something else (Gemini, Llama, Anthropic) at any time. What is likely to happen is that queries will be divided among multiple companies.
It wouldn’t surprise me if the model-makers eventually ended up paying Apple for access to their distribution.
Comparisons could be made with the Apple-Google search deal, but I don’t think it would be as lucrative, at least not until running these foundational models become money printers like putting ads in search results.
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