Today's number: 30. That's the percentage of Gen Z people who believe they are psychic. Ed, does Forrest Gump belong to Gen X, Gen Y, or Gen Z?
Nope. He belongs to Gen A.
Wow, that really moved Claire. My favorite part was the Nope.
It's not a transition from what he said. You said, 'I'm not sure,' then you said 'Nope.' Nope. Gen A.
How was your interview with Ray Dalio?
Oh, it was great. He's got the same perspective he usually has, but I mean, he's been right about a lot of things. Yeah, we had an excellent discussion. Had a great discussion with Gil Laura as well. Talked about the tech earnings, which is interesting, which we'll get into as well. It's been a good week. Good week for the show.
You know what I really enjoyed? I don't listen to your work, but I accidentally stumbled across it yesterday. I listened to the guys talking about AI and power in the grid. I thought that was really interesting.
You should check out the podcast.
I like to watch it because I find you handsome.
That's good. I'll take that. I'll take that. A criticism and a compliment. We're net neutral. I'm happy with it. I found myself putting rewind a lot to try and understand it. And I also want to announce that we are transitioning to a power inference GPU AI center company called Quint AI.
Quint AI. I love it. We're pulling in all birds right after the live tour, which is happening in 23 days. We're going to be in San Francisco. We're going to be in LA. We're going to be in Miami. We're going to be in Chicago. We're going to finish in New York. We're so excited. So please go get your tickets to profgmarketsour.com if you want to come see us. It'll be a great time.
I think this is your first tour, isn't it? It's the first time you've been on a live podcast tour, right?
Yeah, we're super excited and we have guests lined up for all of them. So it's going to be a lot of fun. All right, Ed, should we get to the news?
Let's do it. Today, we're discussing OpenAI's week from hell, also big tech earnings, and also a bailout of Spirit Airlines. So let's get into it. If you haven't already, please subscribe to our Prof G Markets YouTube channel and click the bell to get our latest episodes. It was a brutal week for OpenAI with a string of setbacks putting the company under pressure. A Wall Street Journal report revealed the company missed both key revenue and user growth targets. At the same time, OpenAI's legal battle with Elon Musk kicked off, centered on claims that the company abandoned its original nonprofit mission. And adding fuel to the fire, families of victims from a mass shooting in Canada filed a lawsuit against OpenAI and Sam Altman. The families allege that ChatGPT played a role in the shooting and that its safeguards fell short. Taken together, these moments highlight three core criticisms of the company: questions about the company's financial durability, also concerns around Altman's leadership, and ongoing doubts about its commitment to safety. So, kind of a trifecta of bad news here for OpenAI, Scott, which we are going to unpack now. We should probably start with this Wall Street Journal report, which I have to say was a little bit vague. We didn't really learn much from this. But there are two concrete revelations that we did learn. One is that OpenAI missed its goal of a billion users in 2025. And two is that they also missed on revenue. We don't actually know what the revenue number was. We don't actually know what the revenue target was. All we know is that they missed it last year. And the reaction from the stock market was pretty severe. A lot of companies that have agreements with OpenAI in some capacity fell really hard on the news. So Nvidia fell 4%, Oracle fell 6%, CoreWeave fell 7%, SoftBank, which is a major investor, fell 12%. If you add up the amount of market value that was erased because of this one report from the Wall Street Journal, it came out to nearly $400 billion, which is roughly half of the entire value of OpenAI. I'm going to ask you a question, Scott, but it looks like you're getting changed.
It's so hot in here. We're not used to London struggling with a sweltering 65 degrees today. And anyways, I'm sorry. Trillions of dollars lost market cap. OpenAI.
Exactly. So, well, $400 billion in market value was erased of other companies. And so we don't know what the value of OpenAI actually is because it's private. We can sort of get a sense from secondary markets which aren't as liquid and aren't as sensitive to timing. But the point being, they missed on this according to the Wall Street Journal and other tech stocks were not happy about it. Not a good look for OpenAI. Your reaction, Scott?
I think this is more of an indictment on OpenAI and Sam Altman's leadership than it is on the space because it just strikes me if you look at the big tech's earnings yesterday, AI is just, I mean, it is growing into its expectations or it is meeting and maybe even surpassing its expectations. And by the way, OpenAI probably had incredibly ambitious internal goals. So my guess is the company is still, you know, doing well, just not as well. The biggest thing that's happened is that in just, I've never seen a recalibration of the market leaders this fast. You've never seen Pepsi overtake Coke this fast. You've never seen what was a distant number two in the eyes of the market in December become squarely the number one. So just some data here. Anthropic recently hit $30 billion run rate and OpenAI's run rate is $25 billion. So all of a sudden OpenAI is now the number two. And even more importantly, 80% of Anthropic's revenue is enterprise versus 40% at OpenAI, and enterprise revenue is considered the white meat of this whole space. Anthropic expects to break even by 2028, two years away, versus 2030 for OpenAI. And what's really striking is OpenAI is expected to burn 14 times more cash than Anthropic. It just looks like Dario Amodei seems to be a better operator. And then according to Koshi, in November of 2025, again, only what, six, seven months ago, OpenAI had a 75% chance of IPOing before Anthropic. And today that number has dropped to 31%, and the odds of Sam Altman being replaced as CEO this year are up to 37% from 14% at the beginning of the year. So like, essentially every company but one, Anthropic, would pray for OpenAI's problems. And that is, it's not that OpenAI isn't doing incredibly well. It's just that they've ceded the number one position to Anthropic in what feels like overnight. But my guess is those numbers, if you looked at those numbers, while they might not have met expectations, the sense I get is the company is still on just an unbelievable march. I would argue that the court case is actually going to end really well for Altman. One of two things is going to happen. I think either Musk withdraws the case or it is squarely decided in favor of OpenAI. I think that this court case, I initially thought it would make them both look bad. I think it's going to absolutely, I think it's going to make Musk look terrible, and I don't think he cares. I think he kind of is almost enjoying his villain status, and Sam is going to come out of this, I think, as the big winner here. So I wonder if the court case is going to remove a cloud of uncertainty, and a decision from the court, which I believe will be in favor of OpenAI, will be good for them.
I have thoughts on the lawsuit. I kind of disagree half with your comments. But I'll get to that in a moment. Let's just focus on OpenAI's financials for a moment. I think one of our team members, Chris Nonah, you said it best. She said, you know, we're not in an AI bubble right now. We're in an OpenAI bubble. And I think that's really what we're seeing, where AI businesses across the board are completely taking off, as reflected in the earnings that we saw. I mean, these businesses are just, the numbers are just ridiculous. The growth rates are incredible, growing off of these ridiculously large bases. These are the largest businesses in the world, and they're growing at startup-like rates. It's just kind of insane what's happening here. But the attention is turning towards, like, how are you managing your balance sheet and how are you managing your spending commitments?
Exactly. And you look at the way OpenAI is handling this. I mean, we talked before about how ridiculous and insane it was that they were saying that they wanted to spend $1.5 trillion over the next few years. How many years exactly? They didn't really say, but they came out and they made these commitments. We pointed out that they had generated $13 billion in revenue and they wanted to spend $1.5 trillion. It just made no sense at all. Well, they have now changed the number and they're now saying publicly that they plan to spend $600 billion by 2030. That is the number that they're saying. And that is still an insane number. It's less than half of what they said before, but it's still insane. It's actually in line with the amount of money that Meta is spending right now on AI. The only difference is that Meta is generating $225 billion in annual recurring revenue if we look at the most recent quarter. And OpenAI is generating $25 billion in annual recurring revenue. And so when you just think about the amount that they're planning to spend versus the amount that they're actually raking in, it just starts to get a little bit ridiculous. And then you think about these valuations. I mean, OpenAI, they raised at an $850 billion valuation. They're currently trading at around $880. That's 35 times sales. I mean, there are so many reasons to not trust the trajectory of this company. Not just the fact that we saw this Wall Street Journal report which showed that they actually missed their expectations, but also the slew of other things. The fact that they are kind of lying about how they're going to deal with spending moving forward. The fact that we saw this Ronan Farrow article in the New Yorker where literally every single person close to Sam Altman has said that this guy is basically a serial liar, that he has a serious problem with telling the truth. So clearly OpenAI is having some trouble right now. I think the question is, do we think that $880 billion at the current secondary markets valuation, is that fair? I would say it's, I mean, it's kind of a crapshoot either way, but the most important point would be that Anthropic is now more valuable on the secondary markets. Anthropic is now trading at a $1 trillion valuation, which is something that we thought might happen at the end of last year. And then eventually you did flat out make the prediction that Anthropic would overtake OpenAI. Let's just play that clip really quickly.
I think Anthropic's raising at 350. OpenAI claims are raising at 850. Within a year, and I don't know what the relative numbers will be, but in a year, Anthropic is going to be worth more than OpenAI.
Boom. Boom. That's why they come here. Red, when did we say that? When was that? I believe you said that in, I want to say, February. You said it before it happened, and that's what matters most.
Yeah, it's like, look, I actually think this court case is really good for Altman because I think Altman compared to Dario Amodei makes him look bad, but Altman compared to Musk, I think it comes out looking pretty good. And unfortunately, it's got to be a huge distraction for Altman in an era where his company is struggling. But I kind of buy what Koshi says. But I think there's somewhere between one in three and one in two chance that by the end of the year, especially this pissing match with Satya Nadella, well, they made up. They had their truce last year. They arrived at a deal, and a lot of people would say that Sam Altman came out on top. I would say that they both got a decentish deal, but they did kiss and make up.
But wasn't there a memo leaked where Sam is posting Microsoft and blaming their lack of progress in the enterprise market on Microsoft? Do I have that wrong?
There was before. They had serious tensions that were flaring up. I guess my point being, the new plot point is that they have supposedly made up as they finally came to a deal that I guess OpenAI would be more happy with as of this week. Yeah, we said this a few weeks ago. OpenAI has the most negative momentum of any important company. And then this court case is going to be really illuminating in terms of what comes out. I'm just trying to think. I don't think there's ever been a one becomes two and two becomes one this fast and this radical, as reflected by how much Anthropic's revenue increased in a matter of months. They literally went from $9 billion to $30 billion a year. It took them like a couple of months, and now they're ahead of OpenAI. OpenAI is at 25. I mean, how much can we even trust these numbers? I'm not entirely sure. It's all self-reported, and I just can't wait until these companies go public and we actually know the numbers. I think it's going to be a very big deal. But yeah, I mean, the acceleration, the speed with which Anthropic has scaled and the amount of businesses that are turning to Anthropic, it is really unbelievable.
I just want to turn to the lawsuit for a moment. I think I directionally agree with you, but I think there are a couple of sort of interesting nuances here. I mean, so the reason that this is happening is Elon says, who co-founded OpenAI for those that don't remember, he says that this was supposed to be a nonprofit, and that's why he co-founded this company. And that's why he donated $40 million to this company in its early beginnings, or not company, nonprofit organization. And then they did this sort of ridiculous switch where they suddenly decided, actually no, now we're a for-profit company, now we're an actual enterprise. And he's saying that's ridiculous, which by the way, all of that is true. That is exactly what happened with OpenAI. It was supposed to be a nonprofit, and now suddenly it's a trillion-dollar for-profit company. So Elon is suing them for this reason. But is that really the reason? No. The real reason is that he is now competing with OpenAI via his company xAI, which of course he folded into SpaceX. So he wants to figure out a way to basically kneecap OpenAI and Sam Altman. So he's launching this lawsuit. Now there are two main legal claims that he is making in this lawsuit. The first legal claim is this thing called breach of charitable trust. And this is basically just the idea that there was a break of promise by Sam Altman. This was supposed to be a nonprofit. They turned it into a for-profit, which means that the entire organization is illegitimate. It cannot hold. And he's pursuing this, and the remedy for that could be that they break up the company entirely or that there's huge, huge damages there. But the legal standing for that case is honestly pretty weak because actually it's the attorney general's job to assess whether nonprofit donations were used correctly or misused. He's suing as a donor. I mean, his argument is that the entire organization is completely invalid, and the legal standing there isn't very strong. The other claim, which he has stated he's not actually that interested in, is a fraud claim, and that claim is actually a lot stronger. And basically the claim would be Elon was lied to about where his money was going and what his money would be used for, and therefore he should get his money back. And that's very fair because he donated $40 million into this thing. Now it's not really being used for what he expected on a personal basis. And so maybe he should get his money back. And that's a pretty valid claim. And if he does that and he wins that, then he'll get $40 million back plus interest. Problem solved. Except no, because Elon doesn't really give a damn about $40 million, and nor does OpenAI. And so I think that distinction really gets to the heart of this case here, which is Elon is intentionally choosing the kind of ridiculous route which could potentially gut the entire company but probably won't work out, as opposed to taking the normal route where he says, you guys defrauded me personally. But he's not doing that because he knows that it's not going to kill the company, and that is ultimately his goal here. It's not actually about achieving justice. It's about trying to hamper OpenAI as much as possible, trying to make sure that they have to pay as much money as possible such that they are behind in the race and they ultimately lose to xAI. So my prediction here is that he'll win, but only on the fraud basis, and they'll say, okay, you can have your $40 million back. And then he's going to complain and say, it was a hoax, it was a conspiracy, they should be paying me billions and billions of dollars. And instead he just gets back the money, the amount of money that he put in. So a little bit of nuance there, but I think that that's directionally where we're headed here. This isn't really about justice. It's more about how do I literally destroy Sam Altman's career.
So I've spent some time with someone who, if I were a journalist, I could describe as someone close to the matter. And these are some major points as described to me. One, Altman tried to raise half a billion dollars when it was a nonprofit that he was trying to raise money for OpenAI as envisioned as a nonprofit and could not raise the money. And Musk, seeing a commercial opportunity, said this needs to be a for-profit, that he was the one actively pushing for it to become a for-profit, and I, Elon Musk, need to own 80% of it and control it. And when OpenAI said, no, we're not down with that, he said, I'm out, and signed legally binding contracts giving up all ownership and all governance rights. And then it goes to a little bit about state of mind or intention. Okay. Elon Musk is claiming that he thought he was giving money to something that would help create guardrails to protect the world from the downside of AI, that he's worried about the world and the impact of AI and wasn't interested in for-profit. One, the fact that he was advocating for it to become a for-profit company that he would control flies in the face of that. And two, the fact pattern here does not fit well to Musk's claims of concern around AI because he then went on to found a company which arguably has the fewest guardrails around AI, that is a for-profit AI company that is consistently seen as the one where you go to get, you know, to get porn or visualizations or, you know, it is the people think that most, I believe most thoughtful people who understand the space would go that xAI is the most, quote unquote, is the one with the fewest guardrails. So one, he was the one advocating to turn this thing into a for-profit as long as he got to control it. And when they said no, that's not going to happen, he took his ball and left and went on to start a company that is known in AI LLM for having the fewest guardrails. So maybe in some sort of pyrrhic victory, they give him his $38 million back. But I see this as nothing more than the best example of the biggest case in history of seller's regret. I'm an investor in what's called Boom Technology. Do you remember Boom Supersonic plane?
I'm fascinated with aviation. I invested some money. Right. They hit a wall. They ran out of money and they did a raise and said, okay, we've run out of money. They brought the valuation way down. The CEO did the right thing, made it really compelling to put more capital into the company, and my pro rata was going to be a decent amount of money. And I called some friends, and my friends are like, aviation is a sinkhole, it never pays off. And I called, and I usually do my pro rata, and I didn't, and I basically got washed out of my stake. Fast forward, Boom was working on a supersonic engine, and they've decided that that supersonic engine can be used as possibly an off-grid source of power generation for AI, for data centers. And now I'm not sure. I'm scared to look because I'm going to want to find a time machine so I can go back, find me, kill myself, and then kill former me, or in reverse order. I guess I'd have to do it. I think the company's trading at 10 or 20 times what it was worth a year ago when I was asked to do my pro rata. But I'm not that the equivalent would be if I went back and sued them because I was angry that I missed out on this incredible AI opportunity. I think it is going to be very easy to depict what this is: seller's regret. This isn't about him giving a flying damn about the safety of the world from AI as he goes on to create a Nazi porn bar cosplaying an AI company called xAI. This is about him missing out on the one space of the internet he doesn't own that he wanted to control, and he has seller's regret. And I think they're going to have no trouble portraying him as a villain that has decided he wants to control all of it. It's not enough to control space. It's not enough to control EVs in the US. I wanted to control all of AI, and I messed up, and now I want back. And by the way, something he admitted in the lawsuit is that xAI has been using OpenAI's models and distilling them for their own models. So he kind of admitted in the middle of the court, which is now going to be publicly known to everyone, that they're basically copying OpenAI's technology, that they're almost reliant on OpenAI's technology, which is kind of a big thing to admit on the global stage. So this is going to continue to go on, and I wonder what other things we're going to find out about these guys.
I mean, it's interesting because both of them are highly controversial figures, and it's kind of two, they're both villains in different ways to the world. And ultimately, this is really about reputation. Like a lot of the legal bases for this case are kind of irrelevant, and they don't even matter. A lot of it basically just depends on, like, how do people feel about these guys at the end of the day. Are we going to feel pro-OpenAI, or are we going to feel pro-xAI, or are we going to feel pro-Anthropic? Ultimately, public sentiment, at least among the consumer products, has been the thing that has driven the revenue for these guys. Anthropic's revenue exploded right after they came out as the good guys in a fight against the White House, and OpenAI came out as the bad guys. So this is kind of like the question, like, who's going to show, who's going to end up being the more likable figure at the end of all of this? And I think it's a really interesting question, and I think it's highly possible, as you say, that compared to Elon, Sam is going to come out of this actually looking pretty good, and maybe it will be good for his business.
I don't think OpenAI would settle at this point. I think OpenAI wants it all to come out, and they want a clean, crisp decision that exonerates them and shows Altman is the good guy here. And I think that's exactly what's going to happen. And also, if you look at the filings, my understanding is that Musk was putting it off because he wanted that cloud of uncertainty to hover over OpenAI. Yes. And so I think that my prediction is this is going to be a win for OpenAI.
