Investors claim OpenAI is 'uniquely' positioned to become the world's dominant AI company worth trillions of dollars ahead of Microsoft and Apple: "There has never been a company that has both a dominant enterprise and consumer position early on"
By Kevin Okemwa,
29 days ago
What you need to know
Despite recent bankruptcy claims, investors are betting on OpenAI to become the world's most valuable company worth trillions of dollars ahead of Microsoft, NVIDIA, and Apple.
Investors say the ChatGPT maker is in a unique position because of its unusual scale and structure and could scale greater heights because of its dominant enterprise and consumer position.
OpenAI's latest round of funding from investors could propel its market cap well beyond $150 billion to facilitate its sophisticated AI advances.
In July, a new report revealed that OpenAI was potentially on the brink of bankruptcy within a year. Projections further detailed that the ChatGPT maker would incur losses of $5 billion. This could be attributed to the firm's exaggerated spending on its AI efforts, including spending a whopping $7 billion on training its AI models and an additional $1.5 billion on staffing, despite getting discounted access to Microsoft's Azure services.
The startup generates up to $2 billion in revenue from ChatGPT annually and $1 billion from LLM access fees, barely meeting its estimated operational costs of $3.5-$4.5 billion. For context, OpenAI has already been through seven rounds of funding, pushing its market cap to over $80 billion. And as it now seems, the ChatGPT maker might need another round of funding to keep its business afloat.
Microsoft, NVIDIA, and Apple aren't the only tech companies looking to invest in OpenAI for the long term. New York-based Tiger Global and United Arab Emirates-backed fund MGX are also in deliberations to join the fray, with the deal expected to pull through soon. According to sources familiar with the deal, investors are lining up to participate in OpenAI's round of funding because of its "unusual scale and structure."
For context, investors participating in a round of funding like Thrive Capital will conventionally invest less capital in companies on the verge of bankruptcy to mitigate risks. However, there's seemingly something unique about OpenAI. According to a partner at an investment firm that backs OpenAI:
“We’re talking about the path to building a trillion-dollar company. I don’t think this is unreasonable. The advent of generative AI represented the biggest platform prize since cloud or the internet.”
"We were very confident in our own ability. We have all the IP rights and all the capability. I mean, look, if tomorrow OpenAI disappeared, I don’t want any customer of ours to be worried about it, quite honestly, because we have all of the rights to continue the innovation, not just to serve the products. But we can go and just do what we were doing in partnership, ourselves, and so we have the people, we have the compute, we have the data, we have everything."
Microsoft recently listed OpenAI as a competitor in AI and search. Still, OpenAI's many challenges don't deter investors from looking at the bigger picture. According to one of OpenAI's investors:
“The stakes are high. But there has never been a company that has both a dominant enterprise position and a dominant consumer position early on . . . this type of business tends to be ‘winner takes most’: you’re not going to have two ChatGPTs on your phone.”
They view the challenges as a phase every startup goes through before gaining stability. Do you think OpenAI could become the world's most profitable company ahead of Microsoft, NVIDIA, and Apple?
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