Comment by jotras

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.