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.
Issue is the deteriorating market conditions are already happening, Anthropic didn’t really get ahead of them, but they might just about be able to get the IPO over the line this year albeit for less than they hoped.
What OpenAI will do if market sentiment around AI really falls apart I’m not sure
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. :)
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.
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.
- cursor is good and covers many different use cases (multimodel "agents window", ai assistant in the editor chat, tab completion, cloud agents, ai code & security reviews)
- grok bot was first to market as "openclaw for enterprises" and feel they really pioneered this UX
- grok models are so-so but 4.6 had a great bang for the buck; they may still return to the "pareto frontier" for coding given all the data that cursor has
also the valuation is not only on grok/cursor? also spacex (starling, currently cheapest deliver to orbit; future "data center in space")
actually for an ai company i think they are quite well diversified and have multiple things going on for them; are they worth $1T --> i don't know, but i see a way to them doing really good (will they? on average, probably not, but at least it imaginable)
Grok had the potential of being the #1 LLM if they actually went through with Elons original promise of an "uncensored model". Meaning no guardrails, it does what you tell it, no matter what. Sadly Grok is even more restricted than even OpenAI's models, and despite being marketed as "edgy and ruthless" it is THE MOST politically correct model on the market. ChatGPT or Claude will gladly go along with religious or nationality based roleplay, while Grok outright refuses. Oh and you can't even use it for any pentesting whatsoever because a) it's far worse than the competition b) it completely refuses to even LOOK at low level code.
But this goes along with Elons same promises for X; "X will support free speech" etc even though it's trivial to get banned for the most pointless things.
> > 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.
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.
> They’re almost certainly worth much less than Anthropic
What makes you say this?
The bigger story is that their burn rate is so high.
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.
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.
[delayed]
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.
Issue is the deteriorating market conditions are already happening, Anthropic didn’t really get ahead of them, but they might just about be able to get the IPO over the line this year albeit for less than they hoped.
What OpenAI will do if market sentiment around AI really falls apart I’m not sure
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.
Half inflation, half hype.
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. :)
> I remember the first time a company broke a $1T market cap, and it was a significant moment
But then again 1T today is 700b back in 2018. It's like 6 figures salaries, they don't hit like they used to.
This valuation is a function of early accumulation of compute. They could rent it to Anthropic, or poach more Anthropic engineers.
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.
Anthropic has a higher valuation than OpenAI.
Not for long.
How many companies have a public market valuation over 1T, that seems like a lot
About 14:
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))
I remember Apple being the first ever one-trillion-dollar company in the world. It was in 2018.
So basically the equivalent of the entire US GDP in those 14 companies + OpenAI and Anthropic at a $1T valuation or so.
16 companies with a market cap as big as the entire US GDP.
Make is make sense when 15 out of those 16 are US companies.
Back in, say, 2006, twenty years ago, there weren't 15 companies adding up to the entirety of the US GDP.
Something simply doesn't add up.
It's cheap if you buy the story that they're building a digital god to rule us all.
1T isn‘t what it used to be. Inflation is exponetial.
OpenAI, Anthropic, Google, Nvidia, Grok: they can't all be worth $1T (or $1T additional in Google's case) at the same time.
It's a classic example of short term mispricing.
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.
- cursor is good and covers many different use cases (multimodel "agents window", ai assistant in the editor chat, tab completion, cloud agents, ai code & security reviews) - grok bot was first to market as "openclaw for enterprises" and feel they really pioneered this UX - grok models are so-so but 4.6 had a great bang for the buck; they may still return to the "pareto frontier" for coding given all the data that cursor has
also the valuation is not only on grok/cursor? also spacex (starling, currently cheapest deliver to orbit; future "data center in space")
actually for an ai company i think they are quite well diversified and have multiple things going on for them; are they worth $1T --> i don't know, but i see a way to them doing really good (will they? on average, probably not, but at least it imaginable)
Grok had the potential of being the #1 LLM if they actually went through with Elons original promise of an "uncensored model". Meaning no guardrails, it does what you tell it, no matter what. Sadly Grok is even more restricted than even OpenAI's models, and despite being marketed as "edgy and ruthless" it is THE MOST politically correct model on the market. ChatGPT or Claude will gladly go along with religious or nationality based roleplay, while Grok outright refuses. Oh and you can't even use it for any pentesting whatsoever because a) it's far worse than the competition b) it completely refuses to even LOOK at low level code.
But this goes along with Elons same promises for X; "X will support free speech" etc even though it's trivial to get banned for the most pointless things.
Have you been on twitter?
It's become a huge community of people who have their life savings in Elon, and endlessly circle jerk the hype.
Called it months ago when they released Luna etc. and started subsidizing prices even more.
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.
Who would be crazy enough to invest $11B in OpenAI in this economy?
> SoftBank and Abu Dhabi’s MGX took part in the round
Oh, ok that makes sense.
They wanted to raise 20 billion "from family offices and high net-worth individuals", i.e., fleece the Saudis again but failed:
https://www.wheresyoured.at/running-dry/
They got a bit of pocket change at this insane valuation.
The Saudis have one or two other things on their minds right now that take precedence over Sam Altman
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.
They didn't actually raise that 100 billion fully, tranches were contingent on different factors, some of which haven't even been hit yet.
why not just value it at 40T if we're all just throwing numbers randomly
When this bubble pops the retail investors who are holding the bag are going to suffer so much unfortunately
Wikipedia article on who suffers the most when speculative bubbles pop:
https://en.wikipedia.org/wiki/Greater_fool_theory
Valuation dropped, that's the real news. Altman couldn't raise the amount he wanted to so it's gonna just be a dumping ground in the public markets.