OpenAI investment 'isn't the game I want to play in,' says Primetime Partners' Alan Patricof

CNBC Television
13 Sept 202404:31

TLDRLong-time tech investor Alan Patricof from Primetime Partners discusses OpenAI's valuation, which has soared to a staggering $150 billion. He expresses skepticism about the astronomical figures, considering the company's not-for-profit status and the high burn rate. Patricof suggests that the tech industry is in uncharted territory and likens the situation to past experiences where a few winners emerge amidst many losers. He personally declines to invest, viewing it as a speculative game for others, while acknowledging the broader benefits of AI technology for productivity and business.

Takeaways

  • 🚀 OpenAI is currently valued at $150 billion, which is considered astronomically high.
  • 🏢 It operates as a not-for-profit company with a for-profit subsidiary.
  • 💸 The company is reportedly burning $7 to $10 billion a year for computational power.
  • 🌐 OpenAI and ChatGPT are seen as transformative technologies with an open-ended potential.
  • 💼 Alan Patricof, co-founder of Primetime Partners, believes OpenAI could be the second most valuable economy after ByteDance.
  • 📉 Patricof is skeptical about investing in OpenAI at its current valuation, viewing it as a speculative game.
  • 💵 He suggests that many investors are chasing the name rather than a solid investment strategy.
  • 📈 The secondary market is questioning whether people will buy into OpenAI's valuation.
  • 💹 Big mutual funds and other organizations may try to get a piece of OpenAI before it goes public.
  • 💼 Patricof sees the technology as beneficial for productivity and making money, but questions the ultimate exit value for platform companies.
  • 💼 He also points out that while many will benefit from the technology, it's uncertain which platform companies will prevail.

Q & A

  • What is the current valuation of OpenAI according to the discussion?

    -The discussion mentions a staggering valuation of $150 billion for OpenAI, which is considered astronomical compared to its previous valuation of $80 billion nine months ago.

  • Is OpenAI a for-profit or not-for-profit organization?

    -OpenAI is a not-for-profit company with a for-profit subsidiary.

  • What is the annual burn rate for OpenAI as discussed in the transcript?

    -The transcript discusses that OpenAI is reportedly burning $7 to $10 billion a year for computational power.

  • What is the stance of Alan Patricof from Primetime Partners on investing in OpenAI at its current valuation?

    -Alan Patricof expresses that he wouldn't invest in OpenAI at its current valuation, stating it's not a game he wants to play in and that it's a world he doesn't specifically play in.

  • What does Alan Patricof imply about the future of companies in the AI space?

    -Alan Patricof suggests that there will be a few winners and many losers in the AI space, similar to what he has seen in the past with other technologies.

  • How does Alan Patricof view the secondary market's reaction to OpenAI's valuation?

    -He implies that the secondary market might be speculative, with some big mutual funds and others trying to get a piece of OpenAI before it goes public, driven by the fear of missing out.

  • What is the estimated revenue of OpenAI as mentioned in the transcript?

    -The transcript mentions that OpenAI is believed to have $2 billion in revenues.

  • What does Alan Patricof think about the valuations of big tech companies like Amazon, Microsoft, Google, and Apple in relation to AI?

    -He suggests that suppliers, or 'picks and shovels' companies, which support the AI industry, might be a safer investment than the platform companies themselves.

  • How does Primetime Partners utilize AI in its investments?

    -Primetime Partners invests in companies that support the ageless generation and utilize the benefits of AI to improve productivity and make money.

  • What is the importance of name recognition in the AI industry according to the discussion?

    -The discussion highlights that name recognition, as seen with ChatGPT, is important as it tends to get a lot of attention early on and can influence the perception of the company's success.

  • What is the potential exit strategy for OpenAI according to the transcript?

    -The transcript suggests that an IPO might be the exit strategy for OpenAI, given its not-for-profit status and the need for restructuring to accommodate its high valuation.

Outlines

00:00

🚀 Valuation and Future of OpenAI

The discussion revolves around the staggering valuation of OpenAI at $150 billion, which is considered astronomical given its not-for-profit status and the existence of a for-profit subsidiary. The conversation explores the implications of such a high valuation and the potential need for restructuring to facilitate an exit strategy, possibly through an IPO. The participants also touch upon the company's burn rate of $7 to $10 billion a year for computational power and the open-ended possibilities that OpenAI and ChatGPT offer. The comparison is made to ByteDance, suggesting OpenAI could be the second most valuable economy after it, with revenues of $2 billion. The skepticism about the high valuation is expressed, with a focus on the speculative nature of the market and the tendency for investors to chase hot names regardless of the actual value or cost.

Mindmap

Keywords

💡OpenAI

OpenAI is a for-profit company that conducts research in the field of artificial intelligence with the aim of promoting and developing friendly AI in a way that benefits humanity. In the video, the company is discussed in the context of its valuation and its for-profit subsidiary, which is a key aspect of the discussion around its financial potential and future.

💡Valuation

Valuation refers to the process of determining the current worth of a company or an asset. In the script, the high valuation of OpenAI at $150 billion is a central topic, with the discussion focusing on whether this valuation is justified and the implications it has for investors and the market.

💡Not-for-profit

A not-for-profit organization is one that does not distribute its profits to owners or shareholders but instead uses them to further its mission or goals. OpenAI is described as a not-for-profit company with a for-profit subsidiary, which is a unique structure that raises questions about its financial motivations and sustainability.

💡Computational Power

Computational power refers to the ability of a computer system to process data and perform calculations. The script mentions that OpenAI is burning through $7 to $10 billion a year for computational power, highlighting the immense resources required to run and develop advanced AI technologies.

💡IPO

An Initial Public Offering (IPO) is the process by which a private company goes public by offering its shares to the public for the first time. The conversation in the video speculates about the possibility of OpenAI going public as a way to exit its current valuation and structure.

💡Revenues

Revenues are the income generated from the sale of goods or services. The script mentions that OpenAI has revenues of $2 billion, which is considered astronomical, indicating the company's financial success despite its not-for-profit status.

💡Speculators

Speculators are individuals or entities that invest in assets with the hope of making a profit from short-term price fluctuations. The video discusses how the high valuation of OpenAI may attract speculators looking to capitalize on the company's perceived growth potential.

💡Portfolio

A portfolio is a collection of investments held by an individual or institution. The script mentions that some investment funds and organizations feel the need to include high-profile names like OpenAI in their portfolios to demonstrate that they are keeping up with market trends.

💡Big Tech Companies

Big Tech Companies refer to large, influential technology corporations such as Amazon, Microsoft, Google, and Apple. The script discusses how these companies have seen their valuations increase due to their association with AI and the potential benefits they could gain from it.

💡Platform Companies

Platform companies are those that provide a service or infrastructure that others can build upon or use to create value. The video touches on the question of which platform companies will succeed in the AI space, with OpenAI's ChatGPT being mentioned as having significant name recognition.

Highlights

OpenAI's valuation raises questions about its profitability and future structure.

The company is currently not-for-profit but has a for-profit subsidiary.

OpenAI's valuation has grown from $80 billion to $150 billion in a short period.

The company is reportedly burning $7 to $10 billion a year on computational power.

OpenAI's capabilities with ChatGPT are seen as opening an open-ended world of possibilities.

The value of OpenAI is compared to being the second most valuable economy after ByteDance.

The company is believed to have $2 billion in revenues, which is considered astronomical.

The interviewee is not a shareholder and does not play in the world of high valuations.

The future of OpenAI is speculated to have a few winners but many losers.

Secondary market investors may be skeptical about buying into OpenAI's valuation.

Large mutual funds may try to get a piece of OpenAI before it goes public.

The interviewee would not invest in OpenAI at its current valuation.

The technology sector, including NVIDIA, is benefiting from the demand for chips.

Big tech companies like Amazon, Microsoft, Google, and Apple have also seen valuation increases.

The question arises whether the valuations of these tech giants make sense in the long term.

Investing in suppliers, like those providing chips, is considered a safer bet.

Primetime Partners is investing in companies that support the ageless generation and utilize OpenAI's benefits.

The technology is expected to improve productivity and help companies make money.

The challenge is to determine which platform companies will prevail in the competitive landscape.

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