Why OpenAI could be in trouble if Anthropic's IPO doesn't go well
Jared Carmel, a managing partner at Manhattan Venture Partners, talks with Yahoo Finance Executive Editor Brian Sozzi about OpenAI's (OPAI.PVT) choice to remain a private company instead of selling shares to the public. They discuss how this decision could affect the AI company in the future, especially because Anthropic (ANTH.PVT) is expected to hold its initial public offering (IPO), when a company first sells shares to the public, in November.
Was it a bad business decision for OpenAI not to become a publicly traded company this year?
Yes, I think it was. Now investors will have a similar publicly traded company they can use to compare OpenAI's value. If Anthropic's IPO doesn't go well, I think OpenAI will have a much harder time raising money in the future, especially at the high value investors currently place on it. There is also a real risk that raising money will become a complicated game of negotiations. Investors could basically tell OpenAI, 'You choose how much your company is worth, and we'll choose the terms of our investment.' Once that starts happening, it's hard to know what the deals will look like. I agree that having favorable market conditions is extremely important. Instead of raising more money privately, I think OpenAI should have gone public around the same time as Anthropic. Think about Uber and Lyft.
How much time will investors give Anthropic to keep losing money before they expect it to make a profit? I remember Amazon's early years, when investors were willing to be patient and give the company a chance to succeed. Will investors give Anthropic that same patience?
Look, I think we're still in the early days of AI changing how businesses and industries work. The main difference is that AI companies already have very high values. Maybe that's because the total market they could sell their products to is so large. Or maybe it's because the US dollar has become weaker. We could talk about those possible reasons over a beer sometime. But the important thing is what's actually happening.
What's that? You've got a deal.
Deal. It's settled. So, to put things simply, what we need to see from Anthropic is continued growth in its business. I think one of the most widely known things happening in the market right now is the growing use of open-weight AI models. These are AI models whose trained settings, called weights, are made available for others to use. A few weeks ago, I think about 80% of the money spent on AI tokens went to the major foundation models. Tokens are small pieces of text that AI systems process, and companies often charge based on how many are used. Now, I think that spending has shifted toward open-weight models. So the question is, what should Anthropic do about that change? Think about Amazon again. At some point, does Anthropic need to make a big change in its business, just as Amazon moved from selling physical books to digital books? That's what Amazon did. I don't think Anthropic has to solve this problem today. But over the next 24 months or so, I think we need to pay very close attention to where the AI market is heading, not just where it stands right now.