OpenAI’s Valuation Catches a Nosebleed

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Key Points:

• OpenAI Valuation: Projected to exceed $100 billion with investments from NVIDIA and Apple.
• Strategic Partnerships: Apple's investment hints at collaboration; NVIDIA's role is less clear.
• Valuation Concerns: Questions about the sustainability of OpenAI's high valuation amid rising competition
• Also: Smart money is starting to look ahead to 2025’s biggest winners and has named ‘The Next Nvidia’ to profit

Doug and Lee discuss the growing valuation of OpenAI, which is attracting investments from major tech companies like Apple and NVIDIA Corp. ( NASDAQ: NVDA ), pushing its worth above $100 billion. They speculate on the strategic motivations behind these investments, particularly how Apple Inc. ( NASDAQ: AAPL ) might integrate AI into its products and why NVIDIA would invest, given its existing strengths in AI chips. They express caution about such high valuations, noting the risks of overvaluation, especially when companies go public. Doug and Lee plan to revisit the discussion once the investment round closes to see who else has invested and what the implications might be for OpenAI's future.

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So OpenAI, which it seems like every major tech company in the world is invested in, certainly starting with Microsoft, it appears we'll get some marquee investors at a valuation for OpenAI that would be above a billion dollars.

The investors, yeah, put OpenAI above $100 billion.

Right.

There are only a few situations where you had a valuation of a private company that was that high.

So who's in next?

Well, from everything we've been able to determine, NVIDIA and their buddies at NVIDIA and Apple are there.

And so I think the mere fact that it's NVIDIA and Apple both going in for a big chunk, like we've discussed, are they really working together on the iPhone?

Are they working together on more items?

Is this going to be the start of more interaction between those two companies?

I cannot imagine a company like Apple, anybody writing a check for what's certainly going to be, you know, in the billion dollar range, if they weren't going to do business with somebody.

I mean, I don't think this is just a, Apple thing is, well, if we put in a billion, eventually it'll be two billion.

I think these are parts of some sort of a strategic relationship, which Apple's a big beneficiary of that.

NVIDIA to me is a little bit harder to understand because what do they need from open AI?

Now, it may be something, but it's harder for me to understand NVIDIA than it is Apple.

Yeah, it is for me as well.

Unless there is some sort of technical expertise that OpenAI is sharing with NVIDIA for their chips, for the AI processing, is there some sort of data that they have that will prove useful to them on a technical basis?

Whereas with Apple, is it a question of just, okay, we want to put this into the iPhone or put this into the Mac or whatever, and integrate it into our core products.

Yeah, well, that deal, I'm going to guess, closes within the next month.

Certainly now that it's been in places like the Wall Street Journal, usually this stuff gets accelerated.

It doesn't slow down.

So when they close this round, let's sit down again and see who came in.

It's gonna, there'll be a couple corporations maybe more some venture capitalists and ultimately this is the question is open ai actually worth anywhere near this amount of money given that it's not by itself it's not as if this is they're the only they have competition.

Uh, they do and it makes me wonder if you get up to that.

It's like a nosebleed.

You're getting up to a level where you really have to ask yourself, is it possible that they could be worth anywhere near that much?

Yeah.

And this has happened more and more in the technology world over the last five to 10 years where the seed money, the private equity money pushes valuations so high that when they try to take it public, you know, through an IPO, it...

They don't get anywhere near the dollar amount they're looking for because it just can't be justified.

No, which means if you're the last person in on one of these deals, you're not one of the like, you know, friends and family or A or B or whatever.

If you're in that G round and the thing goes public, you may be part of what is in essence a down round when the thing goes public.

Yeah, so this will be interesting to see.

I still get the sense that at least with NVIDIA, they may have stumbled across or their developers have found ways that chip makers can make everything move faster.

But yeah, again, what happens when their competition catches up?

This is so fluid right now.

The whole thing, the chip guys, the people who make this is such a fluid market probably in a year or a year and a half you'll start to see winners and losers but right now it's very hard to sort about.

Yeah and i i thought NVIDIA's earnings were interesting because as usual they blew them out but it's like you get to the point and again we saw we saw this with other tech companies or old legacy tech companies back in the day intel and you know cisco and people like that where they would blow out earnings and blow out earnings.

And then, you know, you have comps that are so difficult to, to, to surpass that, that it kind of stalls the growth engine.

And then what?

Well, also for people out there who actually look at buying stocks like NVIDIA, keep in mind that if you're an analyst, who's had a buy on a company for a long time, because you see it going up and, those analysts don't drop those things to hold or sell very fast.

So always worth keeping in mind the fact that analysts sometimes stay too long in a stock and they're not necessarily a good barometer when you're looking at a stock like NVIDIA.

Yeah, they get married to it.

And, and, you know, it's like, and it often happens with very good companies where they've seen the increase and they, and, and NVIDIA, as we've talked, time and time again, it traded under $10 for almost 10 years.

You know, so there's some analysts that have followed it all through, you know, the rise as the champion and they're desperately married to it.

So yeah, that is an outstanding point.

Well, when the round closes, we'll come back.

Yeah.

And we'll see exactly who else is in.

I think, and I was reading about this earlier, that thrive that big private equity guys, they're, they're involved as well.

So, I mean, a lot of money is coming in and who knows, who knows, maybe the open AI guys have come up with even more in the last two years and they're just starting like, okay, put in some dough and we'll share it with you.

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