Gary Marcus is not one to shy away from concerns about AI. Now, ahead of OpenAI’s IPO, he sees some of the most popular stocks on the stock market potentially in trouble.
The ChatGPT maker recently secretly filed for S-1, which has since been followed by news that it is considering a price cut. Marcus, an AI researcher who has written multiple books on the subject, posted on X that he sees this as bad news not only for OpenAI, but also for tech stocks with high exposure to OpenAI, such as Nvidia, Oracle, and CoreWeave.
“Their valuation relies to a large extent on the expectation that OpenAI will have huge demand for chips and data centers, but OpenAI is burning through cash very, very, very, very quickly,” Marcus told Business Insider. “If they don’t get public funding, they’re probably going to have a problem. If they have a problem, the future of other companies that count them as major customers is in jeopardy.”
Marcus’ paper centers around the fact that OpenAI requires significant computing power to continue building and expanding its AI infrastructure. Nvidia, Oracle, and CoreWeave are all benefiting greatly from this demand.
If OpenAI’s IPO is troubled or underperforms, a scenario he sees as increasingly likely, the company could be forced to cut spending, thereby depriving all three companies of a major revenue stream.
Marcus has been criticizing OpenAI in recent months, comparing it to WeWork, a former Silicon Valley darling that crashed 99% in the fall of 2023 and is now synonymous with failure.
“WeWork’s valuation was hard to understand (compared to the underlying numbers) and was more show than substance,” Marcus said. “I often look at OpenAI in the same way, but it was clear that they didn’t have a big technical moat, which meant others could catch up, leading to price competition and making it harder to make a profit.”
Marcus made it clear that he sees much the same scenario playing out with OpenAI, especially after moves that could drive down prices. But he also sees significant risks for the startup due to the fact that rival Anthropic has made impressive progress and continues to threaten its market share.
This comes just months after companies recommended cutting back on high AI usage due to high AI costs, creating a new hurdle for OpenAI.
“The demise of tokenmaxxing has forced OpenAI to consider significant cost reductions,” he said. “While that may help retain users, it pushes them further away from profitability.”
All of this points to a scenario that Marcus sees as tech stocks with the greatest exposure to OpenAI at risk if the company’s IPO doesn’t go as planned.
From there, he sees potential for AI credit events that could force lenders to question the stability and creditworthiness of AI-related assets.
“No one knows how big the explosion will be, because we don’t know how much of a problem it will be for lenders, both directly if OpenAI-related loans fail and indirectly if data center loans fail,” Marcus added.