OpenAI Boosts Margins on Paid Products Amidst Intense AI Race

• OpenAI's compute margins on paid products reportedly hit 70% by October, a significant rise from 52% at the end of 2024 (as reported) and half that in January 2024.
• The company, valued at $500 billion, is yet to post a profit and faces substantial computing costs and infrastructure investments.
• Intensifying competition, notably from Google's Gemini, led OpenAI CEO Sam Altman to declare an internal "code red."
• OpenAI is promoting business-focused offerings and paid software tools, competing with Google and Anthropic.
• Discussions are underway to raise at least $10 billion from Amazon.com, potentially involving Amazon's chips, valuing OpenAI over $500 billion.

Why It Matters: OpenAI is improving profitability on paid products while navigating fierce AI competition and seeking new investments.