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What is OpenAI's recent capital raise and its implications?
OpenAI is raising $122 billion. What comes next? Motley Fool Money starts now.
Welcome to Motley Fool Money. I'm Travis Hoey. I'm joined today by Rachel Warren and Lou Whiteman. And guys, the big headline of the end of the day yesterday was that OpenAI has, I guess, officially now raised $122 billion. I don't think they have all the cash yet. But this is companies like Amazon, SoftBank. Microsoft is apparently back in the game, investing in OpenAI. But Lou, I'm curious about a couple of things. This, I think, is definitely the biggest raise in Silicon Valley, maybe even the biggest single raise ever for a company, and they're not really close to being profitable. Does this bring an IPO closer? The ARK funds are investing, so now retail is coming in as well, through a backdoor.
What are your thoughts on that? I know it's a big question, but it just seems like they're setting up for this IPO, but yet they still are burning through tons and tons of cash.
Yeah. I think it's important to note that some of this is backwards-looking. Some of this is just announcing the close of a round where they've announced some of these, or at least it's been reported if they haven't announced it before. A lot of this is just what was coming. Look at the IPO. Look, they say $2 billion or so in revenue per month. Figured out on the valuation, about 35X sales. Guys, I'll be honest, I've seen worse.
That's so crazy, but that is true.
Yeah. But look, theoretically, it's growing, so that's good. Huge caveats with this. Some of Amazon's money is tied to achieving artificial general intelligence. If and when that happens, we'll see. It feels like just lawyer bait. Doesn't it feel like we're going to end up in court in two years battling over whether or not the AI is actually general intelligent or not? The interesting thing here, though, is trying to figure out what from here. OpenAI wants to go public. Shares already trade on secondary markets. Reportedly, it is hard to find buyers for these shares right now. Anthropic is all the rage. I think that's a better gauge if true. And again, I'm not on those. I don't know that if true, that is a more interesting data point than basically a press release announcing kind of all of the hard work they've done.
But to be honest, open a kind of, OpenAI kind of needed the win, right? It's been a rough couple of weeks for them. Even if this is just them out here beating their chest, saying, we're still in this game. We're still in this. Look at all this money we have. Don't be dismissive of us. Maybe that's what they need right now.
Yeah. Rachel, what did you think when you saw this? Like Lou said, some of this we kind of knew was coming, and we knew they needed a bunch of cash, because their projections are just in insane amounts of cash burn over the next few years. But it does still seem notable that some of the biggest companies in the world are just throwing tons of money at them.
This funding round values OpenAI at around $852 billion. You put that in perspective, that's more than the market cap of most blue-chip companies on the S&P 500. OpenAI hasn't even hit the public markets yet, obviously. We have seen, of course, in the past, a bit of a gap between the private market valuation and what a company looks like once they hit the public markets. As Lou mentioned, they're bringing in about $2 billion a month in revenue, but they're looking at a projected $14 billion loss in 2026. They've already said they're planning to burn through about $115 billion in cash over the next two years, you know, due to their investments in data centers and artificial general intelligence. So, you know, then you're thinking, okay, so how does an IPO make sense for investors?
How does OpenAI's funding round affect its IPO prospects?
If you're an institutional investor, right, you're betting on the foundational layer of the entire AI economy. We've seen, you know, institutional investors essentially salivating to own a piece of the business. I I'm curious about whether that appeal, how that's going to translate to a public listing. When you're looking at a valuation of this magnitude, a significant chunk of at least near-term future success is already priced in.
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