Whenever OpenAI announces a funding round, value investors should stay wary of AI-related names. On Tuesday, the firm raised $122 billion in commitments. That implied a valuation of $852 billion.
OpenAI said that it makes $2 billion in monthly revenue, up by 200% compared to 2024. Still, the comparison is likely less impressive if the firm cited a year-on-year change. Competition is heating up. Alphabet (GOOG) (GOOGL) dramatically improved its AI offering in the last few years.
OpenAI abruptly closed down Sora, an AI video generator. That triggered the loss of a deal with Disney (DIS). Disney would have invested $1 billion in the partnership.
Meta Platforms (META) is committing $115 billion to $135 billion in capital expenses for AI. Amazon (AMZN) projected spending $200 billion. That is up by 60% Y/Y.
Heavy investments from the Magnificent 7 members could erode OpenAI’s path to profitability. Already, investors grew increasingly skittish on Microsoft’s (MSFT) CoPilot. ChatGPT powers that AI chatbot. But Office 365 users are not upgrading their monthly subscription to get the CoPilot AI add-on. In addition, Windows 11 users do not like CoPilot in Paint, Notepad, or the operating system.
Few should doubt that OpenAI’s IPO will be a resounding success. It is one of the top anticipated public listings this year. However, SpaceX is arguably more sought after. Either way, expect the stock to pop on the first day of trade. After that, shares might fade when the trading momentum weakens.
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