You can't invest directly in OpenAI -- at least, not right now. However, there are several ways to invest indirectly in the ChatGPT creator. You can also invest in companies that stand to benefit from the explosion in artificial intelligence (AI) that OpenAI has helped ignite.In this article, we'll explain all you need to know about investing in OpenAI.
Will OpenAI IPO?
When will OpenAI IPO?
Many successful private companies decide to conduct an initial public offering (IPO) to raise additional capital to fuel their growth. However, going public doesn't appear to be on the horizon for OpenAI.
In June 2023, OpenAI CEO and co-founder Sam Altman said that his company has no plans to conduct an IPO. There are two primary reasons behind this reluctance to go public. First, OpenAI doesn't seem to need additional capital at this point. Second, the company is concerned that listing its shares on a public stock exchange could limit its ability to develop AI fully.
In particular, OpenAI has committed to developing artificial general intelligence (AGI) and AI super intelligence -- technology that is self-aware and possesses intelligence that far exceeds that of the smartest human. Altman said, "When we develop superintelligence, we are likely to make some decisions that most investors would look at very strangely."
How to invest
How to buy OpenAI stockThe simple answer to how to buy OpenAI stock is that you can't right now. And there's no timeline for when you might be able to do so. However, the next best thing is to buy the stocks of other publicly traded companies investing in OpenAI. Here are three stocks you can buy to invest in the ChatGPT developer indirectly.
The best way to invest in OpenAI is to buy shares of Microsoft (MSFT -1.43%). The technology giant originally invested $1 billion in OpenAI in 2019. It also teamed up with OpenAI to develop new AI supercomputing technologies for its Azure cloud platform. OpenAI moved its services to the Azure platform as part of the agreement. Microsoft also became OpenAI's preferred partner for marketing new AI technologies.
In 2021, Microsoft upped its investment in OpenAI. Then came the firestorm created by the launch of the AI chatbot ChatGPT in late 2022. Microsoft quickly realized the opportunity at hand. In January 2023, the company confirmed that it extended its partnership with OpenAI into a third phase. A key component of the expanded collaboration was that Microsoft Azure would become OpenAI's exclusive cloud provider.Microsoft didn't reveal exactly how much additional money it invested in OpenAI in its third round of funding. However, several reports indicated that Microsoft poured another $10 billion into OpenAI. Under the terms of the deal, Microsoft reportedly will receive 75% of OpenAI's profits until it recovers its full investment. After that point, Microsoft would own a 49% stake in the smaller AI developer.
In 2023, Microsoft aggressively integrated OpenAI's technology into its applications. Microsoft's Bing search engine uses GPT-4, the most advanced AI large language model (LLM) released by OpenAI so far. The "new" Bing initially caused a stir with its sometimes bizarre responses, leading Microsoft to take steps to minimize the odd replies.
Of course, besides its ties with OpenAI, there are other reasons to consider investing in Microsoft stock. The company ranks as a leader in several hot technology areas beyond AI, notably cloud services, gaming, and quantum computing.
India-based information technology (IT) consulting company Infosys (INFY -0.23%) was one of the earliest investors in OpenAI. In 2015, Infosys' then-CEO Vishal Sikka revealed in a blog post that his company had helped fund the then-nonprofit AI developer. Sikka said Infosys would eventually be able to benefit from OpenAI's technology.His prediction proved to be correct. Infosys co-founder and chairman Nandan Nilekani said at the company's June 2023 annual meeting that Infosys has embraced an "AI-first strategy." Although he didn't specifically mention OpenAI or Infosys' investment in the AI pioneer, Nilekani noted the recent "advances in generative AI," which is the use of AI to generate original content and was mainstreamed by ChatGPT.
Khosla Ventures Acquisition Co.Khosla Ventures also was an early investor in OpenAI. In 2019, the venture capital firm provided seed funding for OpenAI, along with the Reed Hoffman Foundation.
Vinod Khosla, co-founder of Sun Microsystems, started Khosla Ventures in 2004. Its focus was to make early-stage venture capital investments in disruptive companies, with a motto of "bold, early, and impactful." Khosla Ventures' investment portfolio features several companies that have gone public and become big winners.
Fintech examples include Block (SQ -0.06%), which operates the Square and Cash App platforms, and AI-powered consumer lending company Upstart (UPST 5.93%). In the healthcare sector, the venture capital firm has backed liquid biopsy pioneer Guardant Health (GH 2.28%) and innovative health insurance company Oscar Health (OSCR -1.31%).
Although you can't invest directly in Khosla Ventures, you can buy shares of two special purpose acquisition companies (SPACs) it has formed. Khosla Ventures Acquisition Co. (KVSA -0.42%) and Khosla Ventures Acquisition Co. III (NASDAQ:KVSC) conducted IPOs in March 2021.
Is OpenAI profitable?
OpenAI doesn't release its financial statements, so we don't have access to details about OpenAI's earnings. However, The Information reported in May 2023 that OpenAI currently is not profitable.The online news site reported that OpenAI's losses were close to $540 million in 2022, roughly doubling from the previous year, according to three unnamed sources familiar with the AI company's financials.
OpenAI acknowledged in March 2019 that it was having "to scale much faster" than originally planned. This required spending billions of dollars on large-scale cloud computing services, staffing, and developing AI supercomputers.
Initially, OpenAI was organized as a nonprofit company. However, to raise the capital needed to fund its aggressive development plans, the company revised its structure to a hybrid for-profit/nonprofit it calls a "capped-profit" company. Under the structure, investors and employees of OpenAI will be able to participate in profits up to a defined cap.
Should I invest?
Should I invest in OpenAI?
Although there's no pure-play way to invest in OpenAI now, many long-term investors might want to consider indirect alternatives. In particular, buying shares of Microsoft could be a smart strategy to profit from OpenAI's technology. No other stock has as strong a link to OpenAI.
Generative AI, such as OpenAI's GPT-4, will likely be a game-changing technology. Global consulting firm McKinsey & Company predicts generative AI could have an economic impact of as much as $4.4 trillion annually. That amount is larger than the current gross domestic product (GDP) of all but three countries – the U.S., China, and Japan.
Investors should also consider buying other AI stocks that could benefit from the generative AI boom. For example, Nvidia (NVDA -2.68%) makes graphics processing units (GPUs) ideal for powering AI apps. Nvidia's GPUs could enjoy strong demand even if an OpenAI rival, such as AutoGPT, ultimately achieves greater success. The downside to buying Nvidia is that huge growth expectations are already baked into its share price.
You could also look into buying stocks of companies using AI. Salesforce (CRM -3.59%), for example, integrated with OpenAI to develop Einstein GPT, which generates content for customer relationship management functions. Another possibility is Atlassian (TEAM -0.35%), which partnered with OpenAI to integrate generative AI into its products.
ETFs with exposure to OpenAI
How to Invest in C3.aiC3.ai is one of the hottest stocks in artificial intelligence today. Learn more about the SaaS and whether it's a good investment.
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How to Invest in Mistral AI in 2023Learn about the new AI start-up Mistral AI and how the company intends to shake up generative AI.
The bottom line on OpenAIOpenAI definitely stands out as one of the leaders in generative AI. ChatGPT isn't likely to be a temporary fad. The power of OpenAI's technology could help usher in a new era where AI plays a much greater role in almost every aspect of society. Although you can't invest directly in OpenAI, you can buy the stocks of companies that stand to profit from its advances in AI.
FAQs about investing in OpenAI
No, OpenAI has not listed its shares on any stock exchange at this point. The company has not announced plans to go public, either. The best alternatives available to investors are to purchase shares of companies that have invested in (such as Microsoft) or partnered with OpenAI (such as Salesforce).
You can buy shares of exchange-traded funds (ETFs) that focus on AI just like you buy individual stocks. Several ETFs hold positions in top AI stocks. The Global X Robotics & Artificial Intelligence ETF is currently the largest of these AI ETFs based on assets under management.