It seems as though OpenAI, on multiple different levels, doesn't really have its [__] together.
I think these companies are just not ready, and they're way more chaotic than they look, even on the outside, even to people following them. They're startups still. They don't have all of the rigor in place that you need as a public company. OpenAI's disclosures are a mess, right? I mean, it's just a very complicated company to try to make sense of. If you're like the SEC, I think they're probably just going to keep sending smoke signals out.
Welcome to Prof G Markets. I'm Ed Elson. It is June 30th. Let's check in on yesterday's market vitals. The major indices climbed as tech stocks rallied. The Dow closed above 52,000 for the first time. Comcast jumped 5% after announcing it is spinning off NBCUniversal and Sky from its cable business. Meanwhile, oil rose after the US and Iran exchanged fire over the weekend. President Trump said the two sides are now set to hold fresh talks today, though Iran denied those claims. And finally, Treasury yields were stable after the Supreme Court overruled Trump's attempt to fire Fed Governor Lisa Cook. Still, in a separate decision, the court expanded the president's authority to fire officials at other independent agencies. Okay, what else has happened?
OpenAI is reportedly delaying its IPO until 2027. The company confidentially filed to go public on June 8th and was on track to debut as soon as this fall, but according to the New York Times, the fallout from SpaceX's rocky IPO has pushed OpenAI executives to hit the brakes. Meanwhile, rival Anthropic is racing ahead. Kalshi now puts the odds that Anthropic goes public this year at 76%.
So to discuss what this delay actually means for OpenAI and for the AI markets in general, we're speaking with Alex Heath, author of the Sources newsletter and co-host of the Access podcast. Alex, thank you for joining us. This is huge news, unconfirmed officially, but this was reported by the New York Times. OpenAI, the plan was they were going to go public. They filed confidentially, and now apparently they're scared of doing it this year. You do a lot of reporting on OpenAI. What do you actually know about this? What can we actually take away from this news?
I think this was always very much in flux. It's been interesting to see how many versions of OpenAI IPOing we can get in the press in the last couple of weeks. It's been kind of remarkable. I think there's a lot of investor banker types who are trying to gin this up. I don't think OpenAI is ready. I know that they're still trying to get their finance and investor relations org in place for what is needed for a public company. When you do the confidential filing, you're, as OpenAI said when it did that, you're really just setting yourself up with optionality to then be able to go out at a later date. But, you know, I remember Reddit, that thing was in confidential filing for years because they thought they were going to go out and then they didn't. And I can't remember if it was the pandemic or something else, but it's very common for companies to do a confidential filing, which is just starting the process with the SEC, and then delay multiple times, even years in some cases.
Doesn't it seem though that at least there are people within the company who definitely did want to? The person I'm thinking of was Sam, and I remember we saw that reporting, and who knows what's true at this point, but we saw this reporting where Sam Altman wanted to go public. He was trying to push that, and then the CFO Sarah Friar said, 'No, I don't think we're ready. I don't think this is the time to do it.' I mean, I have to assume that there are people within the company who really wanted this to happen, and now they're probably having to concede maybe this isn't the right time, specifically Sam.
Yeah. I mean, the reporting is that Sam has been pushing for it, which I totally buy, and that he wants a one trillion dollar valuation, which I also totally buy. I do think there's probably others who are saying we're not ready. OpenAI, Anthropic, these are not normal companies. They don't work like normal companies. They're incredibly chaotic. They don't have formal processes in place that a mature public company would have. As commercial entities, they're really only a few years old. So, even though they have these massive valuations, they very much feel, and you feel this when you talk to people internally, like a startup. And that has a lot of things that have to be ironed out before you can IPO. I do think Anthropic will go out first. I have heard, and others are reporting, that they're eyeing October or November. I think they're a little farther along on building that muscle. They also have a bit of a simpler story to tell investors because of the kind of clarity of what they do as primarily an enterprise API business. OpenAI just has a lot of wild cards, right? Ads are still rolling out. That story is not there yet. The hardware stuff they're going to be doing with Jony Ive, starting with the first device I think they're going to announce in the fall, that's a giant wild card. Their super app strategy has not yet come into place. There's a lot of moving parts, and there will always be with these AI labs, but I think Anthropic actually just has a simpler story to tell right now, which is also why they'll probably go first.
I think that's exactly right. But part of my takeaway from this is it seems as though OpenAI on multiple different levels doesn't really have its [__] together. And this confidential filing, to your point, this happens. Companies file. It takes a while. But you also have to assume that, I mean, someone within the company should have known if we file it's going to be reported on, and if we don't go public that'll be reported on, and everyone's going to have a lot to say about all of this. The same is true of saying we're going to stop doing these side hustles, which was sort of their MO, and then they go out and continue to do these side hustles, including going out and spending $200 million on a podcast. I mean, I feel like there are multiple different levels in which OpenAI doesn't really know what it's doing. Or at least that's the vibe I'm getting from all of these stop-and-start announcements. Am I being too critical, or would that be a somewhat fair characterization of the company?
I think they are a jittery company. I think this IPO thing is really being ginned up in the media by investors. I think the only concrete thing that's happened is they filed a confidential S-1. They said they would do that. When they announced it, they said we do not have a sense of timing. That is the only thing they have confirmed. And then there's a lot of anonymous reporting about, you know, they were thinking about the fall, now they're thinking about 2027. We may get a new round next week saying they're thinking about the fall again based on whatever leaks out of Anthropic. There's a lot of messages being sent through the press right now. I wouldn't necessarily take all of this as like super concrete. I think it is a very dynamic, fast-moving situation. Anthropic's ARR could crater for some reason in the next quarter, and then the story is not there. OpenAI's super app thing could not work, and then it needs another year to regroup from that. Ads could not work, the hardware could not work. You know, they may need to redo the executive bench, right? There's a lot of things that they have to get through. I do think they will IPO. I would be shocked if it was in the second half of 2027. I think it will be before that. Whether that's Q3, Q4 or Q1, Q2 next year, remains to be seen. But we are going to get an IPO because you kind of have to. They've raised too much money. I mean, this is the natural end state. They could do another private round. They'll do an employee tender offer here soon. But, you know, I do think Sam in particular wants the IPO, and, you know, based on the success of SpaceX, at least, you know, on the IPO day, they certainly have a path to that, I think.
Well, it's funny you mentioned that because one of the reasons that was cited in that article for why they're worried about going public was that they saw SpaceX as a failure. To your point, massive pop on IPO day. Since then it's come crashing back down, but it's kind of around where it was when it started. Do you think that that is genuinely a reason that they're worried about it when they look at SpaceX?
I don't know, man. SpaceX, you went into the numbers. Is SpaceX trading at 2.16 trillion a good outcome or not for SpaceX? I mean, based on their revenue, I think it's pretty good. I also think it's ultimately pretty good. I think ultimately it's not going to last, and I think that's going to be a problem, which was honestly why I was a little surprised to see that in the reporting that they saw SpaceX as a problem. Did Scott calling Tesla not being able, being Tesla being over, not teach you anything, Ed? You can't, this is Elon, come on. Look, I think SpaceX at two trillion and raising 80 billion or whatever on the IPO signals there is a market here, right? I don't know if like, you know, the third big AI IPO gets as much love as the second, right? I think that's why OpenAI and Anthropic really want to go first, one of them. It will be a little tougher sell when you hit the third one. I mean, how much retail demand is there for these things, and where will the world be in the fall with the midterms, everything going on in the world, right? So the fall gets kind of hazy and complicated in a lot of ways. I think Elon timed SpaceX perfectly in the sense of this AI bubble fervor we're in in the markets. And it's, I think it's very unclear what happens. You know, the Fed may raise rates in the fall. There's a lot of things that could make the stock market a really dangerous place.
Do you think that ultimately this has implications for the AI trade at large? I mean, if the signal we're getting from OpenAI is there isn't enough demand out there, there isn't enough excitement or hype, or we're not ready, does that mean that we're headed for some problems in the AI market at large, or is this more of an OpenAI-specific issue?
I think it's an OpenAI thing. I think these companies are just not ready, and they're way more chaotic than they look, even on the outside, even to people following them. They're startups still. They don't have all of the rigor in place that you need as a public company. OpenAI's disclosures are a mess, right? With, you know, Sam owns no equity. They're invested in all these things that they're doing deals with. The governance is all over the place. I mean, it's just a very complicated company to try to make sense of if you're like the SEC. So, I think they're probably just going to keep sending smoke signals out, you know, of like, oh, we're going to do it here now. Oh, no, we're going to do it now. Like Anthropic will do the same thing. And we are in uncharted territory. I mean, I feel like that's always the case with AI and the AI trade, but it really feels that way now, doesn't it?
Yeah, we should literally do a smoke signal from Sam Altman's house. Let it out like the Pope when he finally decides that it's time. That will be the right story for investors. Okay. Alex Heath is the author of the Sources newsletter and co-host of the Access podcast. Alex, always great chatting with you. Thank you so much.
