Something nobody's talking about: OpenAI's losses might actually be attractive to certain investors from a tax perspective. Microsoft and other corporate investors can potentially use their share of OpenAI's operating losses to offset their own taxable income through partnership tax treatment. It's basically a tax-advantaged way to fund R&D - you get the loss deductions now while retaining upside optionality later. This is why the "cash burn = value destruction" framing misses the mark. For the right investor base, $10B in annual losses at OpenAI could be worth $2-3B in tax shields (depending on their bracket and how the structure works). That completely changes the return calculation. The real question isn't "can OpenAI justify its valuation" but rather "what's the blended tax rate of its investor base?" If you're sitting on a pile of profitable cloud revenue like Microsoft, suddenly OpenAI's burn rate starts looking like a pretty efficient way to minimize your tax bill while getting a free option on the AI leader. This also explains why big tech is so eager to invest at nosebleed valuations. They're not just betting on AI upside, they're getting immediate tax benefits that de-risk the whole thing.

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Jare 3 hours ago | parent | next [-]

> For the right investor base, $10B in annual losses at OpenAI could be worth $2-3B in tax shields (depending on their bracket and how the structure works). That completely changes the return calculation

I know nothing about finances at this level, so asking like a complete newbie: doesn't that just mean that instead of risking $10B they're risking $7-8B? It is a cheaper bet for sure, but doesn't look to me like a game changer when the range of the bet's outcome goes from 0 to 1000% or more.

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sigmoid10 an hour ago | parent | next [-]

It all depends on the actual numbers. Consider this simplified example: If you are offered a deal that requires you to lay down 10 billion today and it has a 5% chance to pay out 150 billion tomorrow, your accountants will tell you not to take this deal because your expected return is -2.5 billion. But if you can offset 3 billion in cost to the tax payer, your expected return suddenly becomes $500 million, making it a good deal that you should take every time.

	▲	Fraterkes 4 minutes ago \| parent \| next [-]
		I get that this example is simplified, but doesn’t the maths here change drastically when the 5% changes by even a few percentage points? The error bars on Openais chance of succes are obviously huge, so why would this be attractive to accountants?
	▲	lotsofpulp 29 minutes ago \| parent \| prev [-]
		This applies to any spending Microsoft does. What does it have to do with OpenAI? Also, classifying business expenses as "cost to the tax payer" seems less than useful, unless you are a proponent of simply taxing gross receipts. Which has its merits, but then the discussion is about taxing gross receipts versus income with at least some deductible expenses, not anything to do with OpenAI.

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rjzzleep 27 minutes ago | parent | prev [-]

That just doesn't sound right. This kind of thought process only works if you think you are guaranteed more than that the next year. It only works in crony capitalism where your friends in government put money in your pockets. It's where we are right now, but definitely not something that is sustainable or something to aspire to.

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ludicrousdispla 4 hours ago | parent | prev | next [-]

>> For the right investor base, $10B in annual losses at OpenAI could be worth $2-3B in tax shields

So just a loss for governments, or in other words, socializing the losses.

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nkmnz an hour ago | parent | next [-]

OpenAIs losses are someone else's (taxed) earnings.

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booi 3 hours ago | parent | prev | next [-]

Hi, I'm here to hold the bag?

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Groxx 3 hours ago | parent | next [-]

We really should have thought of this before becoming peasants.

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chrishare 2 hours ago | parent [-]

Have you tried not being poor?

	▲	nineteen999 an hour ago \| parent [-]
		It gives you a new opportunity to pull yourself up by the bootstraps. Until mommy and daddy come along with another cash infusion.

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joncrane an hour ago | parent | prev | next [-]

You guys are getting bags?

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chinathrow 3 hours ago | parent | prev [-]

Your pension fund, yes.

	▲	lotsofpulp 2 hours ago \| parent [-]
		This comment makes even less sense than jotras’ comment. Pension funds buy shares in businesses such as Microsoft. The money going into the pension fund is not typically a function of the tax paid by companies such as Microsoft, but rather from a combination of actuaries’ recommendations, payroll tax receipts, and politicians’ priorities. Therefore a pension funds’ equity holdings, such as Microsoft, doing well means taxes can be lower.

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philipallstar an hour ago | parent | prev [-]

Private industry loses 10B. Governments mostly affected as they have less free money to extract.

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pvtmert 2 hours ago | parent | prev | next [-]

Amazon already has not been paying any sort of income tax to the EU. There was a lawsuit in Belgium but Amazon has won that in late-2024 since they had a separate agreement in/with Luxembourg.

Speaking for EU, all big tech already not paying taxes one way or another, either using Dublin/Ireland (Google, Amazon, Microsoft, Meta, ...) and Luxembourg (Amazon & Microsoft as far as I can tell) to avoid such corporate/income taxes. Simply possible because all the earnings go back to the U.S. entity in terms of "IP rights".

	▲	lotsofpulp 2 hours ago \| parent [-]
		> Amazon already has not been paying any sort of income tax to the EU. That should be expected, because https://european-union.europa.eu/priorities-and-actions/acti... > The EU does not have a direct role in collecting taxes or setting tax rates. > There was a lawsuit in Belgium but Amazon has won that in late-2024 since they had a separate agreement in/with Luxembourg. Dec 2023. > Speaking for EU, all big tech already not paying taxes one way or another, either using Dublin/Ireland (Google, Amazon, Microsoft, Meta, ...) and Luxembourg (Amazon & Microsoft as far as I can tell) to avoid such corporate/income taxes. Simply possible because all the earnings go back to the U.S. entity in terms of "IP rights". Ireland (due to pressure from EU) closed this in 2020. The amount of tax collected by Ireland quadrupled. See Figure 5 and 6 in link below. https://budgetmodel.wharton.upenn.edu/issues/2024/10/14/the-...

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lenkite 2 hours ago | parent | prev | next [-]

> OpenAI's losses might actually be attractive to certain investors from a tax perspective.

OpenAI is anyways seeking Govt Bailout for "National Security" reasons. Wow, I earlier scoffed at "Privatize Profits, Socialize Losses", but this appears to now be Standard Operating Procedure in the U.S.

https://www.citizen.org/news/openais-request-for-massive-gov...

So the U.S. Taxpayer will effectively pay for it. And not just the U.S. Taxpayer - due to USD reserve currency status, increasing U.S. debt is effectively shared by the world. Make billionaires richer, make the middle class poor. Make the poor destitute. Make the destitute dead. (All USAID cuts)

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alex43578 an hour ago | parent [-]

There's already a lot that the US taxpayer is on the hook for that's a lot less valuable than a best on the next big thing in software, productivity, and warfare.

It shouldn't be the job of the US taxpayer to feed someone that doesn't want to work, study, or pass a drug test, and it absolutely shouldn't be the job of the US taxpayer to feed another country's citizens half a world away.

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ben_w a few seconds ago | parent | next [-]

Hello, I'm British by birth.

That's pretty close to the story other Brits give themselves for why losing the empire was actually a good thing.

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nielsbot 29 minutes ago | parent | prev | next [-]

> It shouldn't be the job of the US taxpayer to feed someone that doesn't want to work, study, or pass a drug test

What about someone who works and still can’t afford enough housing/food?

> shouldn't be the job of the US taxpayer to feed another country's citizens half a world away.

I mean where’s the profit in that, am i right?

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Ar-Curunir an hour ago | parent | prev [-]

The modern welfare state is the compromise reached by capitalist democracies to stave off communist revolutions. If you’re going to kill of the welfare part, be ready for the uprising part.

	▲	nosianu 29 minutes ago \| parent [-]
		That's where the surveillance and the militarized police force(s) come in. Especially the former now has reached extraordinary levels, given that almost all communication now is easily trackable. Compare that to when we still had revolutions, where it was very hard for government to know what is going on, and to find individuals without a huge effort. I think revolutions have become next to impossible, unless it is lead by significant parts of the elite that controls at least part of the apparatus. That's not even counting the far more sophisticated propaganda methods, so that many of the affected people won't even begin to target the actual culprits but are lead to chase shadows, or one another.

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danielscrubs 2 hours ago | parent | prev | next [-]

Can you explain it in another way? What you are saying is that instead of loosing 100% they loose 70% and loosing 70% is somehow good? Or are you saying the risk adjusted returns are then 30% better on the downside than previously thought? Because if you are, I think people here are saying the risk is so high that it is a given they will fail.

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rebuilder 4 hours ago | parent | prev [-]

It’s hardly a free option, by your numbers it’d be a 20-30% discount.

	▲	thrwaway55 4 hours ago \| parent [-]
		Sure but if there's no moat would you rather pay 100% or 80% until the credits run out? You reap the 100% spend in the meantime. Not everyone even has the no moat discount.