The Backdoor Bet on OpenAI

**Dave** (0:03)
OpenAI is pretty widely considered to be the leader in AI right now. ChatGPT has basically become synonymous with AI, the way Google became a verb for search. There are millions of people using their products every day, millions of businesses. The problem though, for investors anyway, is they're a private company. And yes, OpenAI is actively fundraising. So if you're an accredited investor and you have a network of venture buddies, and in reality, you're on a group text with Sam Altman, you probably can find some shares or an SPV to get a piece of the action. But what about everyone else? Today on Dumb Money, the backdoor way we found to invest in AI that's available to everyone. This is Dumb Money Live.
Hey there, Dave here along with Chris and Jordan. We are Dumb Money. Welcome to Dumb Money Live. Quick reminder to smash the like button. The almighty algorithm wants to hear from you this morning. And guys, before we get started and reveal the investment, I actually have a quote from the CEO that's behind our backdoor investment into OpenAI. He said, and I quote, if OpenAI disappeared tomorrow, we have all the IP rights, we have all the capability, we have the people, we have the compute, we have the data, we have everything. We're above them, we're below them, we're around them. And you might have guessed by now, that quote is from Satya Nadella, the chairman and CEO of None Other Than Microsoft, which is the company that we're betting is a backdoor into OpenAI. So Chris, Jordan, it actually to me seems a little obvious. They made more than a $10 billion investment into OpenAI. It all runs on the Azure cloud for Microsoft. It's built into the Office and other Microsoft products, but Microsoft does not own an equity stake in OpenAI and they don't own any of the IP. That's all a licensing deal. So Chris, let's start with how an investment in Microsoft is the backdoor way to invest in OpenAI.

**Chris** (2:00)
Yeah, so Dave, you know, we've been closely monitoring OpenAI and ChatGPT's data over the course of the last year. We've had a couple episodes on this. It's the fastest growing company in the history of man. It's astonishing what's happening at OpenAI and ChatGPT. They've essentially been number one on the App Store now for, you know, daily for six months. And the next large language model kind of hovers between number 25 and number 100 on the App Store. So it's not even close horse race. It's really mind-boggling. OpenAI has come out recently and talked about the fact that their revenue run rate is now north of 10 billion annually. There's rumors that they could be approaching a $20 billion annual revenue run rate by the end of this year as a benchmark entropic that's been getting a tremendous amount of hype, which is kind of the leader in AI coding is up to I think like a $4 billion annual run rate. And then behind them, it's essentially nobody. I think the AI division of XAI, Elon's company, most recently reported an AI run rate at about $100 million a year. So you're talking about 1%.
XAI is generating like 1%, less than 1% of the revenue. And they're not even remotely growing anywhere near as fast. It's like two different universes of companies, and they're trying to value themselves at close to $200 billion. So I have been trying to invest in OpenAI all year. You guys know that. We actually raised a small fund, a $5 million fund, and got into OpenAI earlier this year. Since then, we've been negotiating a multitude of deals to make a larger investment in OpenAI. My group currently has about $250 million that we've been trying to invest into OpenAI unsuccessfully. So we wanted to be direct on balance sheet, and we have not been successful. It has been torturous. We thought we were going to get in, then we didn't get in. We thought we had time when he reopened this round. We were a little bit slow. And what happened a week before this last weekend is that Iconic, which is the firm that manages Mark Zuckerberg's money, now that's really important to note, Iconic came out of nowhere and bid up the Anthropic round 10 days ago to $170 billion. It was at $100 billion, and they bid it up to $170 billion with a $1 billion commitment that I think is now even higher. I'm almost positive that money came from Zuckerberg. So the same way that he is giving $1 billion pay packages to AI scientists trying to play catch up out of fear.

**Dave** (5:05)