OpenAI, Anthropic, and SpaceX: The IPO Battle Heats Up

OpenAI has recently reached a crucial milestone by filing its paperwork for an initial public offering (IPO), a move that could transform the landscape of artificial intelligence. This announcement means that OpenAI joins the ranks of Anthropic and SpaceX, both potentially on track to go public in the same year. Financial analysts view this rush towards IPOs as a new frontier in the AI race, marking a significant transition for these companies.

With the confidential filing of its S-1 form, OpenAI officially enters competition with Anthropic, another major player in AI. SpaceX, which includes Elon Musk's xAI division, also plans to go public very soon, adding further pressure in this IPO race. Although OpenAI has not yet specified an exact timeline for its public offering, the company is preparing to transition from a private entity to a publicly traded company, involving increased transparency and strict regulatory compliance.

This transition could be driven by several factors, including the need to raise significant funds to support its costly operations. AI labs are moving from an era of behind-the-scenes development to one of public earnings calls, financial disclosures, and the regulations that accompany public company status. This could also be an opportunity to reward loyal employees who hold shares and help retain key AI talent.

Market Outlook

Aravind Srinivas, CEO of Perplexity, stated that his company aims for an IPO in 2028, regardless of the current movements of OpenAI and Anthropic. He believes that the success of these IPOs will influence the entire AI sector. "Regardless of these two companies, we are planning something for 2028, so that remains the case," he told CNBC. Srinivas added that how the IPOs of OpenAI, Anthropic, and SpaceX unfold will have repercussions for the industry at large.

Dan Ives, an analyst at Wedbush Securities, views OpenAI's filing as a signal that the IPO market is booming. "The floodgates of the IPO market are officially open," he wrote in a note. While OpenAI and Anthropic have recently raised significant amounts of capital, both companies are striving to reach the market as quickly as possible to outpace each other due to the amount of capital they are looking to raise. Ives added that Sam Altman, CEO of OpenAI, "continues to face competitive pressures from rivals like Anthropic to show that growth continues to accelerate and will maintain its aggressive pace over the next decade."

Diverging Opinions

Dan Niles, founder and portfolio manager at Niles Investment Management, sees Anthropic in a more favorable light than OpenAI. "I think Google is winning in the consumer space; they have the whole stack," he told CNBC. "I think they are winning in AI overall, but then in the corporate sector, you have Anthropic." Niles mentioned that Anthropic became profitable in the second quarter and that its revenues are increasing dramatically.

Michael Fertik, founder of Verdict Capital, hopes that SpaceX's IPO will trigger a wave of liquidity, thereby supporting American companies in the race for generative AI. "I support Elon Musk. I support IPOs. I support OpenAI and Anthropic," he told CNBC. Fertik added that successful public offerings would help the U.S. stay ahead in the generative AI race.

Valuations and Critiques

Gregory Allen, founder and CEO of Decision Tree Research, highlights the impressive valuations of OpenAI and its competitors, calling them "trillion-dollar companies." "These companies are in the range of a trillion-dollar valuation," he told CNBC, adding that in terms of annuity, this equates to "an annuity generating $45 billion a year, every year, forever." Allen clarified that even though companies like OpenAI will lose money this year, "the gross margins in these companies are extremely favorable."

Gary Marcus, an AI researcher and emeritus professor at New York University, warns that investors should be cautious about high valuations, suggesting that only "latecomers" will pay the steep price. "I was the only one saying the emperor has no clothes," he wrote on X, referencing a tweet about SpaceX's valuation. "Those days are over. The only people who will buy SpaceX and OpenAI at a high price will be latecomers who still can't see it."

Nate Elliott, a senior analyst at EMARKETER, expresses doubts about the timing of OpenAI's IPO, noting that the company could lose its initial advantages without massive financial support. "The company is about to lose its strong initial advantages in the consumer and enterprise AI sectors," he wrote in an email to Business Insider. Elliott added that OpenAI "doesn't have many other options to find the huge capital needed to support its costs."

Finally, Joshua Achiam, chief futurist at OpenAI, presents the situation as a philosophical choice between the visions of Anthropic and OpenAI for the future of humanity. "Should a loving, soulful machine god watch over humanity? Vote Anthropic," he wrote on X. "Should humanity be entrusted with the tools of its own progress and destiny? Vote OpenAI." Achiam dismissed analysis that focuses on the differences between the business models of the two leading AI companies. "If your lens of analysis is 'consumer versus enterprise,' your ability to understand what is happening is irreparably flawed," he wrote.