Earlier this month, Fidji Simo laid out a sharper strategy for OpenAI. That’s it: all the days of startups are over. Now, let’s talk about focus.
According to Business Insider’s must-read profile of the new CEO of OpenAI Applications, Simo told the all-hands meeting, “I can’t afford to miss this moment because I’m distracted by side quests.”
One of the first “sidequests” you’ll tackle is the Sora AI video generation app. This product was a huge hit when it was released last year. So why shut down?
The answer comes down to a growing constraint across the AI industry: computing.
Using AI tokens in OpenRouter’s model platform. open router
“Given the frenzied search for more compute across industries, OpenAI is prioritizing ChatGPT, our largest growth engine,” said Bernard Golden, CEO of Navica, a Silicon Valley-based technology analysis, consulting and investment firm.
Demand for AI computing has skyrocketed in recent months. Data from OpenRouter’s modeling platform shows usage has more than tripled in 2.5 months, showing signs of explosive growth.
On the other hand, supply is not keeping up. Building new data centers is becoming increasingly difficult due to local opposition, energy constraints, and shortages of key components such as memory chips.
OpenAI has been aggressive in securing capacity, pouring hundreds of billions of dollars into data center and chip deals. Still, we still don’t have enough compute to support everything we’re building.
The company alluded to this reality in a statement confirming Sora’s closure, saying, “As our computing demands continue to rise, the Sora research team remains focused on global simulation research to advance robotics that help people solve real-world physical tasks.”
Every day, OpenAI must decide which projects have access to scarce computing resources. This dynamic is not unique and is widespread throughout Silicon Valley. Before the latest surge, OpenAI CFO Sarah Friar talked about these tradeoffs.
Simo’s background suggests how she approaches this challenge. At Instacart, she used advertising to increase profitability and take the company public. Previously, he helped Facebook build its mobile advertising business during the critical transition period leading up to its IPO.
Now she faces a similar situation at OpenAI. Although an IPO is expected within the next year or two, the company continues to lose billions of dollars each year.
Therefore, the pressure is on to identify projects that consume large amounts of compute without generating revenue. After years of experimentation, OpenAI is rich in these features.
Sora is a prime example. This app allows users to create AI-generated videos and is an impressive and widely used tool. There is no revenue generated, and video generation is one of the most computationally intensive AI tasks.
“We have been very surprised by how much power users want to use Sora, and the economics are currently completely unsustainable,” Sora head Bill Peebles wrote in X in late October.
Shutting down the Sora app frees up a large amount of computing resources. OpenAI can now redirect its capabilities to products with clearer revenue potential, such as enterprise services like Codex or advertising within ChatGPT.
In an environment defined by scarcity, focus is more important than ever, especially for companies like OpenAI, which are facing significant losses.
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