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OpenAI’s launch of ChatGPT late last year kicked off an investor frenzy over artificial intelligence.
Lionel Bonaventure/AFP via Getty Images
OpenAI is reported to be seeking a valuation of up to $90 billion—a bid that, if successful, would yield a hefty paper profit for Microsoft, a key investor in the artificial intelligence company.
But Amazon’s experience with Rivian may be a cautionary tale.
The creator of ChatGPT, which set off a market frenzy over AI that has buoyed tech stocks and the
S&P 500
this year, OpenAI is in talks over a share sale that would value it between $80 billion and $90 billion, The Wall Street Journal reported late Tuesday, citing people familiar with the matter.
Microsoft
(ticker: MSFT) immediately looks like a winner. The tech titan owns 49% of OpenAI and invested billions of dollars in the startup in January, when it was valued at less than $30 billion, the report said.
Microsoft invested $1 billion in OpenAI in 2019 and raised its stake with an undisclosed amount in 2021. Its latest investment reportedly covered $10 billion over multiple years.
Neither company immediately responded to a request for comment.
No matter the details, Microsoft would notch an enormous paper gain from a new OpenAI valuation approaching $90 billion. A stake that now may be worth some $12 billion—a conservative figure based on the face value of reported figures and accounting for no appreciation of the 2019 investment—could be valued at $36 billion.
While this should all be good news for Microsoft stock, there may be a cautionary tale from fellow tech behemoth
Amazon
(AMZN), which invested in electric-vehicle group
Rivian
(RIVN) in 2019, before it went public two years later.
Rivian’s initial public offering in November 2021 came around the time both
Bitcoin
and the
Nasdaq
were trading at record highs, at the peak of the last bull market. Given the investor frenzy over AI, and signs that it is a bubble that still has room to grow before bursting, Amazon’s record is worth examining.
The Rivian stake was initially awesome for Amazon. The company reported fourth-quarter 2021 net income of $14.3 billion, of which $11.3 billion was a pretax gain on its holdings of Rivian stock.
That was as good as it got. Shares in Rivian are down 83% since the company went public, and swings in the value of the stock have caused some chaos in Amazon earnings over the years.
Could Microsoft be set for the same fate with OpenAI? If so, investors best be ready to buckle up.
Write to Jack Denton at [email protected]
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