Why the AI executives are mad at their investors
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Illustration: Brendan Lynch/Axios
OpenAI CEO Sam Altman and Palantir CEO Alex Karp both publicly snubbed questions about fundamentals of their companies this week.
Why it matters: AI enthusiasts think the technology is too transformative to be measured by worldly metrics. Wall Street is starting to disagree.
Catch up quick: In an interview with OpenAI investor and podcaster Brad Gerstner, Altman was asked about the firm's $13 billion in revenue compared with its $1.4 trillion in planned expenditures.
- "If you want to sell your shares, I'll find you a buyer," Altman responded.
- Days later, when Karp was asked about famed "Big Short" investor Michael Burry shorting Palantir and broader concerns about the valuation of the stock, he called Burry "bats—t crazy."
What they're saying: "I think it's fair to ask questions" around "valuations today," Rishi Jaluria, managing director at RBC Capital Markets, tells Axios.
- Jaluria adds that he has been getting more questions from investors recently about how AI infrastructure is going to be funded.
Zoom out: This mirrors a broader skepticism around how AI companies are approaching their balance sheets.
- Meta stock is still down 14% since it reported earnings. While the firm reported record revenue, it also teased increased spending plans.
- Meta, Oracle and Alphabet have all issued debt recently, presumably as a means of funding their AI capital expenditure ambitions, which alongside Amazon are projected to swell to over $450 billion this year.
Reality check: AI evangelists on Wall Street are also skeptical that standard metrics, such as valuations, are the best way to analyze these companies.
- "I don't pay attention to valuations that much," Jack Janasiewicz, portfolio manager at Natixis Investment Managers, tells Axios, adding that he sees the metric as subjective.
Zoom in: Valuations, for example, would not take into account OpenAI entering multibillion-dollar partnerships with other tech players.
- Those partnerships have created a "too big to fail type of scenario" for OpenAI, Brad Erickson, an internet equity analyst at RBC, says.
- The biggest question Erickson gets from clients is what could potentially change that narrative, which could stem from broader economic issues rather than any company-specific challenges.
The bottom line: Regarding the emerging disconnect between Wall Street and AI proponents, Jaluria says it comes down to whether you are "truly a believer" in how these tech companies can unlock profitable AI-use cases.
- That exact question is one the hyperscalers are willing to bet half a trillion dollars on.
