OpenAI is reported to be seeking a valuation of up to $90 billion—a bid that, if successful, would yield a hefty paper profit for Microsoft, a key investor in the artificial intelligence company.
But Amazon’s experience with Rivian may be a cautionary tale.
The creator of ChatGPT, which set off a market frenzy over AI that has buoyed tech stocks and the
this year, OpenAI is in talks over a share sale that would value it between $80 billion and $90 billion, The Wall Street Journal reported late Tuesday, citing people familiar with the matter.
(ticker: MSFT) immediately looks like a winner. The tech titan owns 49% of OpenAI and invested billions of dollars in the startup in January, when it was valued at less than $30 billion, the report said.
Microsoft invested $1 billion in OpenAI in 2019 and raised its stake with an undisclosed amount in 2021. Its latest investment reportedly covered $10 billion over multiple years.
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Neither company immediately responded to a request for comment.
No matter the details, Microsoft would notch an enormous paper gain from a new OpenAI valuation approaching $90 billion. A stake that now may be worth some $12 billion—a conservative figure based on the face value of reported figures and accounting for no appreciation of the 2019 investment—could be valued at $36 billion.
While this should all be good news for Microsoft stock, there may be a cautionary tale from fellow tech behemoth
(AMZN), which invested in electric-vehicle group
(RIVN) in 2019, before it went public two years later.
Rivian’s initial public offering in November 2021 came around the time both
and the
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were trading at record highs, at the peak of the last bull market. Given the investor frenzy over AI, and signs that it is a bubble that still has room to grow before bursting, Amazon’s record is worth examining.
The Rivian stake was initially awesome for Amazon. The company reported fourth-quarter 2021 net income of $14.3 billion, of which $11.3 billion was a pretax gain on its holdings of Rivian stock.
That was as good as it got. Shares in Rivian are down 83% since the company went public, and swings in the value of the stock have caused some chaos in Amazon earnings over the years.
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Could Microsoft be set for the same fate with OpenAI? If so, investors best be ready to buckle up.
Write to Jack Denton at jack.denton@barrons.com
