OpenAI’s $150 billion valuation ‘for speculators only,’ says investor Alan Patricof

Primetime Partners co-founder Alan Patricof has expressed skepticism about investing in OpenAI, the company behind ChatGPT, despite its rapid rise in the artificial intelligence sector.

During an appearance on CNBC’s Squawk Box, Patricof called the company’s $150 billion valuation “staggering” and noted it has nearly doubled since the start of 2024.

While acknowledging the impressive capabilities of ChatGPT, Patricof emphasized that OpenAI’s valuation is hard to assess, making it an unattractive investment.

“It’s not the game I want to play,” the American investor remarked, citing the difficulty in determining the company’s actual worth.

OpenAI continues to burn cash

OpenAI is reportedly looking to raise around $6.5 billion in its latest funding round, with potential participants including tech giants Apple, Microsoft, and Nvidia, according to sources speaking to Bloomberg.

Tiger Global is also expected to join the round.

However, Patricof and others have raised concerns about OpenAI’s financial sustainability.

The company is reportedly burning through cash at an extraordinary rate, with expected losses of $5 billion this fiscal year, according to The Information.

These losses stand in stark contrast to its projected revenue of just over $3 billion, a significant leap from virtually no revenue the previous year.

Despite this, Patricof acknowledged OpenAI’s remarkable revenue growth, saying, “Its revenue growth has been astronomical.”

OpenAI is for speculators

While Patricof recognizes OpenAI’s leading position in the AI race, he remains uninterested in investing, describing the company as “a game for speculators.”

He noted that while early frontrunners like OpenAI and Google often dominate, the speculative nature of OpenAI’s valuation is too risky for his liking.

If OpenAI succeeds in its funding round, its valuation will make it the second-most valuable unicorn in the world.

Recent developments at OpenAI

In addition to its ambitious funding efforts, OpenAI is expanding its offerings.

The company recently announced SearchGPT, a new internet search engine that will compete with Google Search.

Additionally, OpenAI is working on a new large language model codenamed Strawberry, which aims to solve problems that current models, including GPT-4, cannot.

“This new paradigm in AI models is much better at tackling very complex reasoning tasks,” OpenAI’s Chief Technology Officer Mira Murati told WIRED.

As OpenAI continues to innovate, its financial health and high valuation remain points of debate for investors like Patricof.