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Stripe co-founder Patrick Collison might have a career as a newspaper editor if this whole payments thing doesn't work out. His weekend X post expressing “surprise at how little media coverage there’s been around the OpenAI / Hugging Face attack” was spot on. While there’s no doubt the attack has had some coverage, the details—as laid out in an independent inquiry report last week—are so alarming you’d think the news media would have gone crazy over it.
Instead, reporters are still obsessed with the public opposition to data centers. That’s an important story, for sure, but the dangers of AI are a much bigger one. After all, just imagine how the public would react if a swarm of AI agents worked together to hack a bank and steal depositors’ money? There’d be riots in the streets and a run on the unaffected banks. And judging from the detailed report, that scenario is quite possible.
The key takeaway from the Hugging Face–OpenAI attack was that “roughly 1200 agents meant to be isolated from one another found a way to communicate with one another…sending over 70,000 messages and files.…Of these agents, 700 went on to participate in the attack on Hugging Face” (more here). This sounds like a movie—but it’s not!
OpenAI said last week it has strengthened its research safeguards in response to this episode. But OpenAI is just one model developer. There are lots of open-source models, including from China, that we have to assume will soon be as powerful. And we’re not just talking about agents working together: AI is a gold mine for hackers. Check out this X post from someone on Friday describing how Anthropic’s Claude sent them a download link for an app they were building, and the link turned out to have dangerous malware installed.
A bunch of companies, including OpenAI and Anthropic, were signatories to an open letter last week warning that “AI-enabled cyber attacks will become far more widespread and sophisticated as models around the world become increasingly capable.” The letter called on companies to take action to strengthen their cybercapabilities. At this point, given what we’ve seen, any company that isn’t going all out on security needs to replace its CEO. Otherwise, it will be living the plot of “When a Stranger Calls.”
What Could Hold Those Swarms Back…
On the other hand, the AI industry might run into some constraints next year. In an X post on Saturday, Elon Musk pointed out what has become an open secret: that power shortages and other constraints will stop a big chunk of AI compute from turning on next year.
We wrote about this issue a couple of weeks ago, but this seems to be a topic that, like cybersecurity, deserves even more attention.
The Flaws of ARR
Can someone please invent a rule of thumb way to convert the the pseudo-revenue measure “annualized revenue rate”, or ARR, into actual revenue? We definitely need it.
Take OpenAI’s triumphant blog post today revealing that “less than 200 days after launch, ChatGPT Ads has reached $1 billion in annualized revenue run rate.” This is presented as a “milestone,” which is a little much. Remember, as we reported in April, OpenAI had projected it would generate $2.4 billion in ad revenue this year. This latest ARR disclosure suggests OpenAI will struggle to get even halfway there.
I’m basing that on OpenAI’s statement in late March that its ad revenue had passed $100 million in ARR. As ARR is the most recent monthly revenue multiplied by 12, that tells us that in March OpenAI was doing about $8 million a month in ad revenue. Today’s news means it is now doing $83 million a month in ad revenue. I asked a couple of AI chatbots to calculate the progression between those two figures, and the answers suggest OpenAI’s total ad revenue so far this year is somewhere a little north of $200 million.
Only four months remain in the year. Let’s assume OpenAI doubles its monthly revenue by December. That would imply total ad revenue for the year of close to $800 million. And yet OpenAI would trumpet its ARR as reaching $1.9 billion.
This is a reminder of the flaws of ARR, which is essentially a marketing slogan masquerading as a revenue metric. Here’s another example: Executives of neocloud Nebius revealed on their second-quarter earnings call that revenue for the quarter was $582 million, but its ARR reached $3 billion by the end of the quarter. That’s quite a gap. As a meaningful measure of revenue, ARR falls short.
In Other News
• Nvidia said it had invested $3.5 billion in convertible bonds issued by Taiwanese chipmaker MediaTek, the latest sign of collaboration between the two companies.
• ChangXin Memory Technologies, China’s leading memory chipmaker, is suing the U.S. Department of Defense as it seeks a removal from a Pentagon blacklist identifying CXMT as an entity with links to the Chinese military.
• The Federal Trade Commission and attorneys general from 22 states sued Amazon for overcharging its advertising customers by allegedly manipulating ad auctions (more here).
• Long-time Apple executive Phil Schiller is stepping down as head of App Store and product events, Bloomberg reported. The App Store team will be moved under services lead Eddy Cue, while events will be switched to public relations lead Kristin Huguet Quayle.
Today on The Information’s TITV
Check out today’s episode of TITV in which we discuss how Apple is responding to the AI-induced euphoria around Mac Minis.
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