The real headline is that they couldn’t hit what they wanted in terms of valuation and funds raised. Just were not enough people willing to invest given concerns that it may be downhill from here for a while on AI.
This will also make it even harder to avoid any future IPO being a down round. They’re almost certainly worth much less than Anthropic and Anthropic is, per reports, struggling to keep its valuation much above 1T, and even that may fall through.
I would be shocked if Anthropic IPOs below 1.25T. Prediction markets have it at 1.625T now. Even quite conservative Aswath Damodaran puts it at 1.45T.
I think once you go below that you can probably just sell on open market without any IPO dance like finding institutional investors.
We always see these headlines and think "is XYZ company actually worth that much?"
Class A stock gets paid out first, so "valuation" here is not what a retail investor would necessarily pay for class C.
Basically, do these people think that they'll get their $11B back? If so, they are ok with a high "valuation" because there is little risk. And with OpenAI's corporate structure, who knows what is actually happening.
OpenAI seems to me like they are operating with a slightly longer horizon strategy than Anthropic. Going for the IPO is the last resort in my mind. It is what you do to get ahead of deteriorating financial conditions. I don't think Anthropic had a choice at their projected burn rate. Why would we surrender all our cloaks and daggers unless we absolutely have to? The political and regulatory headwinds are not looking favorable for AI companies as of a few days ago.
Going for the IPO collapses a large space of options that are available to the business. The AI business is entirely about data. Anthropic's IPO would generate an incredible amount of data that could be used by its competitors to refine their strategy. Knowing where to allocate capital is perhaps worth more than the capital itself at these scales.
I think OpenAI is one of the most important companies in a generation, but on a tangent, I remember the first time a company broke a $1T market cap, and it was a significant moment. Nowadays multi-trillion-dollar valuations are becoming more common — I wonder how much it reflects inflation vs companies being genuinely bigger than they used to be. If it’s more about inflation, then we can expect to see dozens and hundreds more in the coming decades. Founders: recalibrate your ambition for the new era.
It is pretty much all inflation. Just look at the gold price over the same time frame. Gold did not become more productive or scarce. In fact, we have more of it now than we ever had.
2018 when Apple was first across the threshold, it’s P/E was around 20. Currently near 40.
Then inflation has cut the dollar in half in a bunch of categories. So that would put it at $4T with no growth at all.
Another way to look at it would be to think of this openAI news as announcing they have a $250B valuation if you’re fixated on pre-covid prices like I am. :)
It still baffles me that Grok is even on the list let alone being funded. Their market share is terrible and the product is so mediocre. Why on earth would I want a tool that has “be funny and irreverent” baked into its system prompts? I don’t want a calculator cracking wise at me either.
Not sure how long you'll be able to sell compute to anthropic for. They are constrained right now but they have an insane pipeline of take or pay contracts, and if those are delivered they'll be drowning in compute in a couple of years time.
Do you think they would actually sell compute to anthropic? Relative to working with other labs that feels like conceding the overall AI race atleast outside of consumer.
> > As OpenAI bides its time, the company is engaging in early stage discussions with investors about a potential new funding round. The company could raise around $30 billion, CNBC previously reported, but that figure could change.
> I predicted last month when they launched Luna that they had raised more funding and I suspect this tidbit dropped to CNBC is just prepping the public for a fundraising that’s already happened. There will probably be an announcement this month.
The story here is that Sam wanted to raise a lot more, but could not. Investors almost certainly want to see how the Anthropic IPO plays out before deciding whether to keep showering these companies with money.
Valuation wouldn’t hold if public. He couldn’t raise the 30B he wanted. I’m not sure how much runway OpenAI has, but sounds like a similar to Anthropic story with valuation likely if in the public markets declining.
Sam raised a $100B in previous round. I think a direct listing ipo would see their valuation go up to $4T, and then they could do some at the market sales as needed.
This will also make it even harder to avoid any future IPO being a down round. They’re almost certainly worth much less than Anthropic and Anthropic is, per reports, struggling to keep its valuation much above 1T, and even that may fall through.
What makes you say this?
Unless things change considerably, this is less than a 6 month runway.
It's not common for raises to give you this little runway.
You could read into it that they expect to IPO in far less than that amount of time, and this is a short bridge until then.
Class A stock gets paid out first, so "valuation" here is not what a retail investor would necessarily pay for class C.
Basically, do these people think that they'll get their $11B back? If so, they are ok with a high "valuation" because there is little risk. And with OpenAI's corporate structure, who knows what is actually happening.
Going for the IPO collapses a large space of options that are available to the business. The AI business is entirely about data. Anthropic's IPO would generate an incredible amount of data that could be used by its competitors to refine their strategy. Knowing where to allocate capital is perhaps worth more than the capital itself at these scales.
2018 when Apple was first across the threshold, it’s P/E was around 20. Currently near 40.
Then inflation has cut the dollar in half in a bunch of categories. So that would put it at $4T with no growth at all.
Another way to look at it would be to think of this openAI news as announcing they have a $250B valuation if you’re fixated on pre-covid prices like I am. :)
But then again 1T today is 700b back in 2018. It's like 6 figures salaries, they don't hit like they used to.
It's become a huge community of people who have their life savings in Elon, and endlessly circle jerk the hype.
https://news.ycombinator.com/item?id=49117798
> I bet they’ll announce new fundraising soon. Someone gave them a top up to try and corner the market.
https://news.ycombinator.com/item?id=50012065
> > As OpenAI bides its time, the company is engaging in early stage discussions with investors about a potential new funding round. The company could raise around $30 billion, CNBC previously reported, but that figure could change.
> I predicted last month when they launched Luna that they had raised more funding and I suspect this tidbit dropped to CNBC is just prepping the public for a fundraising that’s already happened. There will probably be an announcement this month.
https://www.wheresyoured.at/running-dry/
They got a bit of pocket change at this insane valuation.
Apple ($4.98T), NVIDIA ($4.51T), Microsoft ($3.94T), Alphabet ($3.49T), Amazon ($2.80T), TSMC ($1.95T), SpaceX ($1.82T), Saudi Aramco ($1.69T), Meta ($1.56T), Tesla ($1.42T), Broadcom ($1.40T), Berkshire Hathaway ($1.22T), Eli Lilly ($1.21T), (Walmart ($0.996T))
Wikipedia article on who suffers the most when speculative bubbles pop:
https://en.wikipedia.org/wiki/Greater_fool_theory