Artificial intelligence has made a lot of noise in the stock market lately, with bots from Alphabet Inc. and startups Anthropic and Altruist disrupting businesses from software to financial services. But one name has been conspicuously absent from the chatter: OpenAI.
The erstwhile AI kingmaker has been passed by its rivals, or at least that’s the public perception. However, Wall Street isn’t ready to throw in the towel on the maker of ChatGPT or the companies attached to it.
“It is very possible, if not likely, that at some point this year OpenAI will have come out with a new model that’s recaptured the zeitgeist, reversing the perception that it is lagging,” said Brian Barbetta, co-leader of Wellington Management’s technology team and a co-portfolio manager on the global innovation strategy. “It stands to reason that the OpenAI-connected stocks will benefit as well.”
The shares of companies tied to OpenAI have come under heavy pressure in recent months. A basket of companies connected to OpenAI has tumbled 13% this year, while a basket of Alphabet-tied stocks is up 22%. So that vibe shift is sorely need.
On Thursday, the OpenAI basket rose 0.2% while the Alphabet basket jumped 1.2%.
But there’s growing optimism among investing pros that OpenAI’s also-ran status is temporary. Should sentiment continue to improve, it could spur rallies in its major partners like Nvidia Corp., Oracle Corp., Microsoft Corp., CoreWeave Inc. and Advanced Micro Devices Inc.
Perceptions about OpenAI’s leadership in the technology landscape shifted last fall after Alphabet’s Gemini AI model received broad acclaim. This year, the story has been Anthropic’s Claude model, which has sparked repeated selloffs in companies considered to be in its competitive path.
“Other AI companies are doing well,” Barbetta said. “But so far we haven’t seen evidence that their success is opening at OpenAI’s expense in any meaningful way, in terms of growth or usage.”
The next turn in sentiment could reopen the door for OpenAI. ChatGPT’s revenue trends are improving, according to a recent report. And the company unveiled a new version of its Codex AI coding agent earlier this month, which was lauded by Chief Executive Officer Sam Altman.
A key upcoming catalyst is OpenAI’s next funding round, which will give a sense of how comfortable investors are about funding the company’s money-losing operations, particularly with Anthropic grabbing the headlines. OpenAI is looking to raise up to $100 billion. Meanwhile, Nvidia is reportedly closing in on a deal to invest $20 billion, and Microsoft and Amazon.com Inc. are also said to be talking about investing.
“If there’s money going in at a higher valuation, then that shows that investors who have done their due diligence are pleased with its progress, which is a vote of confidence and at a bare minimum, helps de-risk the near-term horizon for companies in the supply chain,” Barbetta said.
OpenAI’s fundraising momentum “appears constructive,” adding to improving sentiment surrounding its ecosystem, Mizuho Securities’s trading desk wrote in a note on Wednesday.
“This is a sharp contrast to last week, when Amazon and Google both put out massive capex guidance,” Daniel O’Regan, managing director of equity trading at Mizuho, wrote. “A lot of bears interpreted that as intensifying competition for OpenAI, but that trade seems to have reversed pretty quickly.”
The key issues for companies in OpenAI’s orbit are its ability to keep raising money and how quickly it can increase its revenue. There’s a roughly $207 billion gap between the company’s revenue and its spending plans between now and 2033, according to calculations by HSBC in November. Narrowing that difference will be harder if users are gravitating to products made by OpenAI’s rivals.
“If they’re not able to satisfy investor questions about how they’re going to bridge the gap between their spending commitments and their revenue, we’ll see that reflected in the price action of the supply chain,” said Thomas DiFazio, lead ETF strategist at Roundhill Financial.
“Anthropic’s rise complicates the view that OpenAI can meet its obligations,” DiFazio added. “If Anthropic is the leader, that will definitely impact the confidence people have about whether competitor models can keep up with their growth, or justify the premium being paid for that growth.”
Roundhill is rebalancing its AI portfolio to recognize what it sees as Alphabet’s AI leadership, a shift that has it tilting away from OpenAI names on the margin. Still, DiFazio stressed that sentiment could flip back to OpenAI’s favor and support the stocks connected to it.
Oracle is one of the most notable companies to hitch its wagon to OpenAI. Its shares have lost more than half their value since hitting a high in September, with much of the weakness reflecting concerns about its relationship with OpenAI. Investors question both Oracle’s heavy spending to build out its cloud-computing infrastructure — with added risk over how it is tapping the debt markets — as well as OpenAI’s ability to meet its spending obligations to the company.
But that sentiment is starting to change. D.A. Davidson recently upgraded Oracle shares based on the firm’s more positive view about OpenAI.
“Oracle has had some pressure given the intimacy of the relationship it has with OpenAI,” DiFazio said. “If OpenAI is able to demonstrate efficacy with its latest model, that could be really important to Oracle.”
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