Alan Patricof, co-founder of Primetime Partners, expressed skepticism about OpenAI’s soaring valuation of $150 billion, questioning its sustainability given the company’s high operational costs and relatively low revenue. He emphasized a cautious investment approach, suggesting that focusing on essential tech suppliers like NVIDIA may be a safer strategy than investing directly in AI platforms, while acknowledging the transformative potential of AI technologies.
In a recent discussion, Alan Patricof, co-founder of Primetime Partners, shared his thoughts on the staggering valuation of OpenAI, which is reportedly aiming to raise funds at a valuation of $150 billion. Patricof expressed skepticism about this valuation, especially considering OpenAI’s current structure as a not-for-profit organization with a for-profit subsidiary. He noted that just nine months ago, a valuation of $80 billion seemed astronomical, and now the figure has escalated dramatically, raising questions about the sustainability of such valuations in the tech sector.
Patricof highlighted the significant operational costs associated with OpenAI, estimating that the company is burning through $7 to $10 billion annually for computational power. He acknowledged the transformative potential of OpenAI and its products like ChatGPT, suggesting that we are entering a new era in technology. However, he questioned how high the valuation could realistically go, given that OpenAI reportedly generates around $2 billion in revenue, which he found impressive but still raises concerns about the overall valuation.
When asked if he would invest in OpenAI if given the opportunity, Patricof firmly stated that it is not the type of investment he is interested in pursuing. He likened the current investment landscape to a speculative game, where some investors feel pressured to include high-profile names in their portfolios to avoid missing out on potential gains. He cautioned that while there may be a few winners in this space, there will also be many losers, as evidenced by recent market trends.
The conversation shifted to the broader implications for major tech companies like NVIDIA, Amazon, Microsoft, Google, and Apple, which have also seen their valuations rise in response to advancements in AI technology. Patricof emphasized that investing in companies that provide essential components, such as NVIDIA’s chips, may be a safer strategy compared to investing directly in AI platforms. He believes that these suppliers are likely to benefit from the growing demand for AI technologies.
Finally, Patricof noted that his firm, Primetime Partners, is focused on investing in companies that leverage the benefits of AI to enhance productivity and profitability. He acknowledged that while many companies will benefit from AI advancements, the challenge lies in determining which platform companies will ultimately prevail in the competitive landscape. He recognized ChatGPT’s strong brand recognition but remained cautious about the long-term viability of such high valuations in the tech industry.