:max_bytes(150000):strip_icc()/GettyImages-2236730082-7d325ac2577f4e4b8db85236516a9a34.jpg "AI Giant OpenAI Is Getting a Lift Lately. So Are Stocks Linked to It. Here’s Why")
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Key Takeaways
- Shares of Oracle, Microsoft, Nvidia, and other tech heavyweights with ties to OpenAI have gained this week after a string of positive developments for the startup.
- Worries about OpenAI’s ability to meet its obligations have rattled confidence in the AI trade in recent months, particularly shares of companies that have struck big deals with the company.
Fresh optimism about OpenAI’s finances is boosting some corners of the AI trade.
Though OpenAI isn’t publicly traded yet, the world’s most valuable private startup has been firing back at worries about its competitiveness and ability to make money lately. That’s helped inject some enthusiasm into the shares of the tech heavyweights increasingly tied to—and whose shares have benefited from—its success.
The ChatGPT maker said yesterday it’s rolling out ads to its flagship chatbot, in what JPMorgan analysts had suggested ahead of the release would mark a major shift in its ability to monetize the technology. And late last week, as OpenAI released the latest iteration of its code-writing tool Codex, CEO Sam Altman told employees that ChatGPT is “back to exceeding 10% monthly growth,” with an updated model expected sometime this week, according to CNBC. OpenAI did not respond to a request for comment on that report in time for publication.
Why This Matters to Investors
Some of America’s biggest tech giants’ fortunes are becoming increasingly tied to private startup OpenAI’s outcomes, expanding the startup’s reach. Even if you don’t own any equity in OpenAI, or hold individual tech stocks, your portfolio’s performance could still feel OpenAI’s influence if you have funds that track broad market indexes in which OpenAI’s partners, investors, and suppliers hold sway.
OpenAI’s string of positive news lately has been enough to soothe some worries about stiffer competition and whether the company will be able to meet its massive obligations. It has also marked a shift in narratives around the firm; new agentic tools from rival Anthropic recently sent shares of software companies threatened by the tools, along with some stocks tied closely to OpenAI, into a tailspin.
“We believe that a revamped OpenAI will return to its position as Google’s top challenger and with a fresh stack of capital be able to live up to its obligations this year,” D.A. Davidson analyst Gil Luria wrote Monday.
That optimism could be beneficial for shares of Oracle (ORCL), which have taken a hit in recent months amid worries about its dependence on deals with OpenAI, Luria wrote. The stock popped nearly 10% yesterday and was recently up another 4% following an upgrade to “buy” from the analyst. Still, the shares are down roughly 50% from their September highs, before investors found out OpenAI accounted for more than half of Oracle’s cloud backlog.
Microsoft (MSFT), a major investor in OpenAI that derives about 45% of its Azure backlog from the startup, has also seen its shares rise this week. So has Nvidia (NVDA), which is both a supplier and backer of OpenAI.
Some concern remains, however. OpenAI’s turn to ads, which Altman has previously called a “last resort,” has for some underscored financial pressures on the company, as well as raised the possbility that it could drive some users to rivals that don’t sell ads.
