How to Invest in OpenAI? 5 Alternative Vehicles

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Not financial advice – I’m not a financial advisor and I own some of the companies in this article.

Can I Buy OpenAI Stock?

Initially founded as a non-profit, OpenAI later created a for-profit arm to attract capital and is now structured as a capped-profit company.

As of 2024, you cannot buy OpenAI stock in the public markets because it’s not a listed company with a stock ticker. So as a retail shareholder, you cannot invest directly in OpenAIf – no pure play.

But there are some alternatives. For instance, Microsoft (MSFT) owns 49% of OpenAI and you can buy its stock as a proxy. Yet, the percentage of OpenAI’s contribution to MSFT overall valuation is small (~1-2% at the time of writing), so even if OpenAI’s valuation rises by an order of magnitude, it only has a small impact on the MSFT stock.

OpenAI continues to seek funding and large institutional investors or private equity firms typically have opportunities to invest in companies like OpenAI during funding rounds.

⚑ These opportunities are often not available to the general public. As an individual, it might be challenging to invest directly in OpenAI unless they decide to go public through an IPO (Initial Public Offering) or if they offer investment opportunities through other means.

But it is possible to invest in companies that are invested in OpenAI, as a proxy, or invest in alternative companies that are likely to succeed when OpenAI succeeds. Let’s dive into five ways next! πŸ‘‡

Investment Vehicle 1: Microsoft

Microsoft’s strategic $10 billion USD investment in OpenAI has proven to be a savvy move, allowing it to capitalize on OpenAI’s AI advancements.

Source: OpenAI

By integrating OpenAI’s technologies like ChatGPT into its products, notably Bing, Microsoft is enhancing its services and expanding its competitive edge.

This partnership not only improves Microsoft’s product offerings but also promises significant financial returns, with Microsoft set to receive a substantial share of OpenAI’s profits until its investment is recouped.

The collaboration places Microsoft at the forefront of AI innovation, opening new markets and solidifying its position as a tech leader. This smart alliance with OpenAI thus offers Microsoft both direct financial benefits and a strengthened market presence.

Investment Vehicle 2: NVIDIA

NVIDIA emerges as a compelling proxy for OpenAI’s success, especially in light of reports that OpenAI trained the GPT-4 model on a massive fleet of 10 million NVIDIA GPUs.

source

This large-scale use of NVIDIA’s GPUs shows the increasing demand for powerful AI chips, essential for training complex models like GPT-4T and GPT-4V with vision and multimodal models being especially GPU hungry.

NVIDIA’s role as a key supplier of these GPUs positions it advantageously in the AI market, potentially benefiting from the exponential growth in AI and machine learning technologies.

Global compute hunger is about to explode, see this graphic:

πŸ’» Related: “On a X-Space discussion Elon Musk had with Peter Diamandis, Elon revealed that AI compute is increasing by 10X every six months and that there will be gigawatt power for clusters in 2025. The planned Kuwait cluster will use 700,000 Nvidia B-100. Each Nvidia B-100 will be about 60-100 times the power of an A-100.Brian Wang

Here’s another graphic from ARK showing that compute hunger won’t be stilled soon and AI training will continue to explode:

As OpenAI continues to push the boundaries of AI capabilities, NVIDIA’s GPUs play a critical role in this technological advancement, making it a strategic investment choice to capture some of the upside of OpenAI’s innovations.

Investment Vehicle 3: Anthropic + ARK Venture Fund (Proxy)

The Ark Venture Fund (ARKVX) doesn’t hold OpenAI but it holds one of its biggest competitors, Anthropic, that have launched their very successful Claude 2 model and are actively building additional models.

Anthropic was founded by senior members of OpenAI, so they know the ins and outs of generative AI!

Interestingly, Anthropic seems to make a huge chunk of the ARKVX fund, at the time of writing 12.8%:

At the time of writing, the total annualized fees are 2.9% which is not cheap but affordable given that it’s difficult for retailers to invest in many of these companies. Investment is possible by means of the Titan app. Do your own research, no financial advice.

πŸ’» Recommended: Claude 2 LLM Reads Ten Papers in One Prompt with Massive 200k Token Context

By the way, Anthropic is also backed by Amazon through a $4 billion investment:

source

Investment Vehicle 4: Meta

Meta’s Llama 2, an advanced 65-billion-parameter large language model, underscores the company’s strong position in AI, especially in open-source LLM developments. By making Llama 2 freely available for research and commercial use, Meta democratizes access to top-tier AI technology, enabling widespread innovation.

Llama 2 and other open-source models seem to catch up with closed-source generative AI developments such as OpenAI and Anthropic (source)

This open-source approach, combined with their partnership with Microsoft to make Llama 2 available on Azure, significantly expands its potential applications.

The general AI market is experiencing rapid expansion. The global AI market size was valued at USD 93.5 billion in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 38.1% from 2022 to 2030. This market trajectory indicates a strong potential for Llama 2’s impact in the AI sector, given Meta’s more open-source approach.

Investment Vehicle 5: Tesla

Tesla is a competitor of OpenAI but, as I’ve written multiple times, I believe Tesla is the most advanced AI company in the world because its massive progress and world-class talent in real-world, robotics, and embodied AI.

It’s easier for Tesla to catch up with LLM progress than its for OpenAI to catch up with real-world AI (robotics, Optimus, and FSD).

To read my investment thesis, feel free to check out these three articles:

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